Maytag Goes for a Spin

A new buyout bid has heads spinning again at Maytag (MYG).

A month after the Newton, Iowa, company surprised Wall Street by accepting a $1.1 billion buyout offer, Maytag got a competing bid from a group that includes a fast-growing Chinese appliance manufacturer.

A group led by Bain Capital Partners, Blackstone Capital Partners IV and Haier America Trading wants to buy Maytag for $16 a share. That's $2 a share better than an offer Maytag accepted last month from Ripplewood Holdings. Maytag said it intends to proceed with further due diligence with the Bain-Blackstone-Haier group, though it stressed it "continues to support the Ripplewood transaction."

"The offer from Ripplewood is a tentative agreement," says Maytag spokesman John Daggett. "This latest bid is simply a preliminary proposal, so at this point, there has to be six to eight weeks of due diligence done before management can properly consider this bid. Essentially, Ripplewood proposed marriage while this new group just asked for a date. That's why the board said they'll pursue this new bid, but at this point, we still have an agreement with Ripplewood."

Laura Champine, an analyst with Morgan Keenan, calls the defense of the Ripplewood deal "interesting."

"I think that Maytag is accepting offers at the low end of their earnings cycle," says Champine, who doesn't own Maytag shares and whose firm doesn't have an investment banking relationship with the company. "To accept a $14 offer when your stock has traded below $14 for maybe a month in the last 15 or 20 years, I think that's a little questionable. I think shareholders are right to question that announcement."

To be sure, Maytag shareholders have suffered mightily in recent years. The company's business model has been rendered all but obsolete by Asian manufacturers benefiting from significantly lower labor costs. Last June, Maytag endured a dramatic restructuring that cut its salaried labor force by 20% and cut its dividend payments in half. Credit rating agencies slashed its debt to junk.

The knockout blow came in April when Maytag posted $7.7 million in first-quarter profits -- one-fifth of its earnings from the same quarter last year -- and halved its earnings guidance for the year. Shares lost more than a third of their value, having already fallen steadily for years.

Smelling blood, Ripplewood came forward in May. While management agreed to the deal, some shareholders wrinkled their noses at the price tag and accused senior executives of looking out for themselves.