NEW YORK – Maytag Corp. (MYG), one of the premier brand names in America for nearly a century, but struggling recently with sagging market share and profits, said on Thursday it agreed to be acquired for $1.125 billion by investors led by private equity firm Ripplewood Holdings LLC (search).
The group will pay $14 a share and assume $975 million in debt, according to Maytag. The offer implies a premium of 21 percent to Maytag's closing share price of $11.56 on the New York Stock Exchange.
However, that premium evaporated almost immediately after the announcement as the stock rose more than 20 percent to $14.01 in after-hours trading.
The deal comes as Maytag, an American brand icon which makes washing machines and driers and other household appliances like Hoover vacuum cleaners, struggles with higher steel prices and fierce competition from rivals.
In addition, the company has lost display space at retailers like Best Buy Co. Inc. (BBY), which is dedicating more shelf space to products from Asian competitors like LG Electronics and Samsung Electronics.
Founded in 1893 in Newton, Iowa, by F.L. Maytag as a farm implement company, it introduced its first washing machine, the Pastime, made of water-resistant wood, in 1907. Two years later came the first power washer, the Hired Girl, and by 1924, one out of every five American washers purchased was a Maytag.
It was one of the most trusted brands, as evidenced by long-running TV ads featuring "the Maytag repairman" who had nothing to do because the washers and driers were so good.
But last week, Maytag halved its quarterly dividend after posting an 80 percent drop in first-quarter profit in April and said it was looking to restructure its debt.
The company, whose stock has tumbled since the April earnings report to 21 year-lows, expects the deal to close before year-end.
David MacGregor, an analyst with Longbow Research in Cleveland, said the value of Maytag's brands was what probably attracted the investors but it would require more effort to turn the overall business around.
"The real value of the business is in the brands and the retailer relationships," he said. "The company is pretty much mispositioned. If they can turn things around as a private company, the work will require long-term focus."
"Such a repositioning is difficult in the quarter-to-quarter environment of a public company. This is probably a five-year proposition," MacGregor said.
Ralph Hake, Maytag's chief executive, said in a statement that going private would give the company more flexibility to accomplish its long-term goals.
"Our objectives for Maytag are to continue to take action to become a global low-cost producer and to accelerate growth by introducing innovative new products, expanding its presence in international markets and pursuing selective acquisitions," said Timothy Collins, Ripplewood CEO.
Ripplewood manages more than $12 billion in capital, and has investments ranging from automotive to retail, banking and entertainment industries. Previously, the company has been more about buying into iconic Japanese companies.
In addition to Ripplewood, other members of the investor group are RHJ International, GS Capital Partners and the J. Rothschild Group of Companies.
Maytag said it intends to recommend to its shareholders that they embrace the deal.
Lazard (LAZ) served as financial adviser and Wachtell, Lipton, Rosen & Katz served as legal adviser to Maytag. Citigroup (C) and Goldman Sachs (GS) acted as lead M&A advisers to Ripplewood, in addition to JP Morgan (JPM) and Deutsche Bank (DB), who acted as M&A advisers to Ripplewood.
Cravath, Swaine & Moore LLP served as legal adviser to Ripplewood. According to Maytag's statement, Citigroup, JP Morgan and Deutsche Bank have provided commitments for the debt portion of the financing for the transaction, which are subject to customary conditions.