In Whirlpool/Maytag deal, investors in limbo, awaiting DOJ decision, I gave a quick assessment of my take on the antitrust issues raised by Whirlpool's proposed acquisition of Maytag. We still don't know whether DOJ will challenge the deal, but it's clear that the staff investigating the deal doesn't like it.
According to this Reuters article, DOJ lawyers against Maytag takeover: source, staff has "'made it clear' to the antitrust chief, Thomas Barnett, that they believe the $1.7 billion deal would hurt competition." The article states that "it was not clear whether the staff lawyers had given him a formal recommendation." Given my own experience at DOJ, I can pretty much guarantee that a formal recommendation has in fact been made.
I'm equally confident that staff is preparing for a court challenge. Think about it--Barnett only has until March 30 to decide whether he's going to challenge the deal. That's just over two weeks away. If Barnett decides to ask a court to enjoin the transaction, DOJ will have to race--not walk--to the courthouse to prevent the parties from closing the deal. It stands to reason that while staff awaits a decision from Barnett, it must prepare for litigation.
According to Maytag, Whirlpool Shares Drop on Theory, it sounds like staff has plenty of fodder for a complaint. The article has this interesting tidbit:
Prudential Equity Group analyst Nicholas Heymann said he believes the DOJ will oppose the merger "based on the potential for anticompetitive pricing by the merged entity."
In a March 17 research note to investors, he speculated that the merger only makes economic sense for Whirlpool if the company increases the price of some washers and dryers to help boost profits.
The big losers here? Maytag and its shareholders, of course. While the rest of us speculate about how all of this will play out, Maytag's financial position continues to deteriorate at its shareholders' expense. So, in the end, even if Whirlpool doesn't get to acquire Maytag, Whirlpool will leave Maytag even weaker than it was when it first bid for it. Ironic, isn't it?
