BY JOE BRISBEN
Maytag! of Newton, Iowa! Being bought out by three private firms?Eventually going off the New York Stock Exchange? I could not believe the news.
My parents owned the Brisben Furniture & Appliance Company on East Broadwayin Enid, Oklahoma. The showroom featured Maytag washers, dryers, and otherappliances. When lined up, the white doors of those appliances looked likerows of perfect teeth.
The company can trace its roots back to an Iowa farm implement manufacturer,F. L. Maytag, in 1893. In 1907, Maytag introduced its first washing machine,the “Pastime.” It had a wooden tub with a blade that agitated theclothes when the operator turned a crank.
By 1909, the machine was being powered by tractors and other farm engines.By 1915, Maytag’s laundry division was outselling farm implements.
I made a mental inventory of the Maytag appliances in my home: Maytag washingmachine and dryer, Amana refrigerator and microwave oven, and a Hoover vacuumcleaner. I have lived in homes that had Jenn-Air and Magic Chef stoves. Ihave used Jade outdoor cooking appliances and Dixie-Narco machines fordispensing cold drinks. I have called in the fabled Maytag repairman onlyonce in my entire life.
What is happening is that Ripplewood LLC, Goldman Sachs’s GS CapitalPartners, and J. Rothschild Group, all of them private organizations, are buyingMaytag for $1.13 billion, or $14 a share, and assuming $975 million in debt.Ripplewood will hold 70 percent of the stock, and the other two partners willshare the remaining 30 percent.
The trio will pay cash for the shares. Some investors have been anticipatinghigher offers, but so far, no other buyers have stepped forward.
If Ripplewood and company get their way, the stock will no longer be publiclytraded, but let’s fervently hope there will always be a Maytag. However,as FTN Midwest analyst Eric Brossard says, “There’s a lot ofwork to be done at Maytag.”
Ralph Hake, former CFO of Whirlpool and Maytag’s CEO since 2001, andhis staff have been doing a lot of work. They slashed $150 million in coststhis year after the company suffered its first earnings loss since 1995 andMoody’s downgraded its senior unsecured debt. Hake and his staff cutthe dividend in half, and they plan to close some plants.
However, David MacGregor, an analyst at Longbow Research, says more needsto be done.
“Maytag is really the last player in the game that isn’t operatingon a global basis,” MacGregor said. “It may need five years toreturn to profitability and competitiveness.
“It sounds as if Ripplewood is intent on taking action to become a global,low-cost producer and to accelerate growth with product innovation. But becominga global producer in this market starting where Maytag is today is going tobe exceedingly difficult.”
MacGregor pointed out Maytag has been hurt by newer designs from Siemens AGin Europe and from such Asian producers as LG Electronics and Samsung, so muchso that Best Buy announced that it would drop the Maytag line in favor of LG.
Moreover, Maytag has been a distant third for some time to Whirlpool and GeneralElectric in penetrating foreign markets with products and in transferring plantsto foreign countries with cheap labor.
Maytag has warned the United Auto Workers (UAW) union, which represents manyof the company’s production workers, that if the two parties cannot quicklyfind ways to cut costs, the plant in Newton, Maytag’s historic headquarters,could be closed. The plant there employs 2,800 workers, which is 17.5 percentof Newton’s 16,000 population.
If the UAW and Maytag cannot make a deal, it may mean the end of an era inrural Iowa in which the ideal that product dependability or “Made inAmerica” could command a premium price.
The Ripplewood deal also probably means the end of Maytag’s long resolveto keep nearly all its manufacturing in the United States.
Nevertheless, Timothy Collins, who founded Ripplewood in 1995, said, “Maytaghas an incredible brand and products and will prosper better as a private companybecause it can better reinvest [earnings] in its product line and address itscost structure.”
In 2000, Ripplewood bought a failing bank corporation in Tokyo, turned itsfortunes around, and recently put it back on the stock market. Maybe it cando the same for Maytag.