New suitors

New York, July 18: Whirlpool Co on Sunday night offered to buy rival Maytag Corp for about $1.4 billion in cash and stock, an unsolicited proposal that could set off a politically sensitive takeover fight for the venerable but troubled Iowa appliance manufacturer.

Whirlpool’s proposal comes a month after a consortium of investors led by the American unit of Chinese appliance company Haier Group expressed interest in buying Maytag for about $1.3 billion. Haier Group’s bid includes funds from US private equity firms Blackstone Group LP and Bain Capital LLC.

Haier Group’s proposal, which followed a successful bid by the Chinese firm Lenovo Group to buy International Business Machines Corp’s personal computer business, helped touch off a wave of anxiety about the ambition of Chinese companies to grow into global brands by snapping up well-known US firms. Maytag, long known for ads featuring its under-employed repairman, produces such iconic American brands as Hoover vacuum cleaners and Amana appliances.

The anxiety level increased last month after the Chinese oil firm, CNOOC Ltd, made a hostile $18.5 billion bid for California-based Unocal Corp. Some members of the Congress oppose CNOOC’s bid, saying the Chinese firm benefits from below market-rate financing from the Communist government in Beijing and that selling a US oil company to a Chinese firm could threaten national security.

Experts have said Haier Group’s offer for Maytag has no national security issues, dealing as it does with washers and dryers rather than oil and gas. But the offer does present some of the same tough questions about trade relations between the United States and China raised by the CNOOC bid for Unocal.

As with CNOOC, Haier is majority-owned by the Chinese government and the firm’s chief executive, Zhang Ruimin, is a ranking member of the Communist Party. Critics say this could give the firm unfair financial support from the state.

In a letter Sunday to Maytag CEO Ralph F. Hake outlining his firm’s proposal, Whirlpool’s chairman and CEO, Jeff M. Fettig, did not directly refer to growing financial competition between the US and China.

He said, however, that a Whirlpool-Maytag combination would create a strong competitor in a marketplace that now includes “a growing number of foreign appliance makers”. Maytag, the third largest US appliance maker behind Whirlpool and General Electric, has struggled in recent years with rising labour costs and harsh pricing competition.

Officials at Maytag, Blackstone Group and Bain Capital could not be reached Sunday for a comment.

In his letter to Hake, Fettig said Whirlpool would be willing to pay $17 for each Maytag share, with “at least 50 per cent” coming in cash and the rest in Whirlpool shares.

The letter from Fettig does not represent a formal offer, which would come only after direct talks between Maytag and Whirlpool. The investors led by Haier Group, who said they would be willing to acquire all outstanding Maytag stock for $16 per share, also have not submitted a formal offer.

Ji Guangqiang, a spokesman for Haier Group in Qingdao, China, declined to say whether his company would continue to pursue Maytag, asserting that government regulations prevent the state-owned company from speaking with the press without requesting an interview through the Foreign Affairs Office of the municipal government.

As China’s state-owned companies go abroad to buy up foreign firms to develop new markets, they have increasingly sought to argue that they operate independently of the government. But Ji said that his firm is under strict orders to say nothing publicly without going through proper state channels.