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Maytag might become owned by a Chinese corporation as well........

Chinese firm wants Maytag


For years, American workers have worried about losing their jobs to low-cost workers in China. Now a new trend is emerging that could be nearly as big: Wealthy Chinese companies are coming to the U.S. looking to swallow American companies whole.

Maytag Corp., the maker of such quintessentially American products as Maytag refrigerators, Amana microwaves and Hoover vacuum cleaners, disclosed Monday night a $1.28 billion takeover bid from a group led by Haier America Trading, a unit of China's Haier Group.

If Haier is successful in outbidding an investor group led by New York-based Ripplewood Holdings, the company that is the bedrock of Newton, Iowa, likely would see much of its production move to China.

While Haier is known in the U.S. for the low-cost refrigerators and air conditioners sold at Wal-Mart and Target stores, in Europe and Asia it sells designer-quality appliances as part of a wide range of appliances. It ranks among the top-three makers of refrigerators in the world by sales volume.

Now Haier may be taking on one of the biggest challenges yet: snatching up a big-time U.S. branded-goods giant.

Haier's move to buy Maytag follows Lenovo Group's purchase of IBM's personal computer business, completed in May. And more moves by Chinese industrial giants to buy up Western brands almost certainly are on the way. China National Offshore Oil Co. is considering a bid for U.S. giant Unocal.

Clyde Prestowitz, author of a new book focused on the competitive threat posed to the U.S. by China's economic expansion, said the Haier takeover bid for Maytag is an important symbolic step.

"This is the debut of China into a global brand, a global presence," Prestowitz said. "It also signals that China has moved beyond just being a place for cheap labor. They're going for technology. They're going for brands."

To Martin Sorrell, chief executive of advertising giant WPP Group, these first moves by Chinese companies are the beginning of a major trend to snatch up global brands. Chinese companies have been unsuccessful in building brands from scratch for export around the world, so they are buying them instead.

"They're all looking very carefully at what opportunities there are around the world," Sorrell said. "It's dangerous to underestimate them."

Still, said Sorrell, Chinese companies face a steep learning curve. At first they tried to buy brand recognition by saturating markets with advertising. Now they're beginning to follow a proven model from Western companies, building brands by creating emotional connections with consumers.

Haier is beginning to understand that. The company's English language slogan, "Haier and Higher," sounds like the handiwork of a Western-style marketing agency.

For Newton, the Haier bid comes on the heels of Ripplewood's offer last month, which itself shocked the local citizenry. Newton is an old-style company town that has owed as many as half its jobs to Maytag since the company was founded there in 1893.

Still, in recent years Maytag has foundered. Lackluster product development, high labor costs, management miscues and cutthroat pricing competition in the appliance market have cut into the company's financial results and left it with nearly $1 billion in debt. Maytag lost $9 million last year on $4.7 billion in sales.

$16 vs. $14-a-share offer

It is unclear precisely what Haier would plan to do with Maytag. Haier America Trading LLC teamed with Bain Capital Partners LLC and Blackstone Capital Partners IV LP late Monday night to bid $16 a share for Maytag. The bid is contingent on completion of due diligence on Maytag, a process that could take as long as eight weeks, and on arrangement of debt financing through Merrill Lynch & Co.

The Haier group's bid tops a $14-a-share definitive merger agreement struck in May between Maytag and Ripplewood. That deal values Maytag at $2.1 billion, including the assumption of $975 million in debt.

Officials from Maytag, Ripplewood and Haier did not return phone calls seeking comment.

Ripplewood, which owns or controls as many as 60 U.S. companies, made its name during the 1990s with the turnaround of Japan's biggest failed bank, now called Shinsei Bank. It is known for an ability to restructure and reposition companies, shutting unsuccessful operating units yet retaining workforce and operations in the U.S. that can compete in a global marketplace.

"If Ripplewood is successful, they'll rebuild the business. They'll turn it into a global business that can be competitive. That's a different model than what Haier would do," said a source knowledgeable about Ripplewood's strategy.

Distribution network sought

Haier would be expected to move production of most of Maytag's branded products to China. Company officials have indicated an interest primarily in Maytag's strong distribution and product-repair networks and not necessarily its brands.

That strategy might make sense, said Hal Sirkin, a partner with the Boston Consulting Group, who is knowledgeable about the production and distribution strategy of Chinese companies.

"If your goal is to use your product base, what you'd like is to have your brands and put your brands through Maytag's distribution network," Sirkin said.

Haier could leverage the deal by shipping its own branded appliances through Maytag's distribution channel. Ripplewood, as a financial buyer with no other major consumer products companies in its portfolio, could not.

A source knowledgeable about Ripplewood's strategy conceded that the strategic fit could give Haier an advantage. But the source said Maytag would be better off if the issue were resolved quickly.

"Every day that goes by that Maytag isn't working at fixing Maytag is one more lost day," the source said. "That's not good for Maytag."

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Finding a good fit

Maytag, a maker of home appliances, has a pending acquisition deal from Ripplewood Holdings, but a second bid is on the table. The interested parties are Haier Group, an appliance-maker based in China, and investment companies Bain Capital and Blackstone Group. The latest offer boosted Maytag's stock price.

COMPANY PROFILES

Company name

HAIER GROUP

Headquarters: Qingdao, China

CEO: Zhang Ruimin

Employees: 11,395

2004 sales: $12.3 billion

Some products offered: Air conditioners, freezers, microwave ovens, refrigerators

Company name

MAYTAG

Headquarters: Newton, Iowa

CEO: Ralph F. Hake

Employees: 18,000

2004 sales: $4.72 billion

Some products offered: Washers and dryers, dishwashers, refrigerators, cooking appliances, floor-care products

MAYTAG

Daily closing stock price

Tuesday: $16.06, up 5.5%

Sources: The companies

Chicago Tribune

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