Chinese-Led Mergers on Hold

Haier withdraws bid for Maytag; Chevron sweetens offer for Unocal over CNOOC's protestations.
Stephen TaubJuly 20, 2005

Maytag Corp. announced that China-based Haier America Trading LLC and U.S.-based private-equity firms Bain Capital Partners LLC and Blackstone Capital Partners IV L.P. have withdrawn their bid for the appliance maker.

Last month the group had offered $16 per share in an all-cash deal, topping the bid of $14 per share by Ripplewood Holdings LLC, which Maytag had already agreed to. But following this week’s $17-per-share preliminary proposal by Whirlpool Corp., the largest appliance maker in the United States, Haier withdrew its offer without comment, reported the Associated Press.

Reuters observed that Whirlpool’s offer could be a defensive maneuver designed to prevent another strong international competitor, from gaining control of Maytag. However, a Whirlpool-Maytag deal could face significant antitrust barriers in the United States, the wire service also noted.

The acquisition could cost Whirlpool much more than the $1.37 billion it would pay for Maytag’s shares, however. Figure in the assumption of debt, the costs of pensions, and the likely costs of plant closures, Prudential Equity Group analysts reportedly wrote, and the total cost to Whirlpool could approach $3.3 billion.

Meanwhile, U.S. oil producer Unocal Corp., which had already agreed to be sold to Chevron Corp., was more than happy to accept a sweetened offer from Chevron for $63.01 per share, or a total of more than $17 billion. The latest offer, $2.50 per share higher than the earlier bid, calls for Chevron to pay 40 percent in cash and 60 percent in stock. Unocal stockholders are scheduled to vote on the deal at a special meeting scheduled for August 10.

Still on the table is an $18.5 billion all-cash offer from CNOOC Ltd., a Hong Kong-based subsidiary of a Chinese state-owned oil company. The AP noted that last week, the CNOOC board reportedly authorized its management to increase its offer if necessary, but added that the company won’t confirm those reports.

According to Reuters, Unocal shareholders may also be worried that the U.S. government might try to block the acquisition, citing security concerns, or that the deal could remain stalled in a long review process. To address those concerns, CNOOC agreed to place $2.5 billion in escrow for Unocal shareholders should CNOOC walk away from a deal, and another $500 million in escrow to pay a Chevron-Unocal break-up fee, the wire service reported.

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