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Deal With NV Philips to Make Whirlpool the Biggest Appliance Maker

August 19, 1988|From Reuters

NEW YORK — Whirlpool Corp. said Thursday that it would buy a majority stake in the large-appliance division of NV Philips of the Netherlands for $470 million, making it the world's largest appliance manufacturer.

Whirlpool said it will acquire a 53% stake in a new joint venture that will manufacture and market major appliances under the Philips brand name.

Whirlpool said the purchase will make it the world leader in the industry, with annual sales of about $6 billion. Electrolux of Sweden is currently the world's largest with 1987 sales estimated at around $5.1 billion.

"This is a great day for Whirlpool, and a vital step toward achieving our strategies of global expansion and enhancing shareholder value," Whirlpool President David Whitwam said in a statement.

Analysts and Wall Street largely agreed. Whirlpool stock closed up 12.5 cents at $25.75 a share, after hitting $26.25 early in the day. "This definitely enhances the investment merits of Whirlpool," said Charles Ryan, analyst with Merrill Lynch.

The company said the acquisition will not reduce Whirlpool's earnings.

Whirlpool said the joint venture did not yet have a name. It will be headed by William Maeyer, currently senior managing director of the Philips major appliance division.

It will be based in the Netherlands, where about 14,000 employees will build clothes washers, dryers, refrigerators, freezers, stoves and microwave ovens.

The new venture is a sign of the increasing consolidation within the appliance industry.

It also underlines the increasing internationalization of the business, with mergers between North American and European companies.

"Our industry clearly is becoming a global one," Maeyer said in a statement. Analysts said Whirlpool had been eager to infiltrate the European market as part of a strategy to expand globally.

"Whirlpool has been anxious for some time to become a factor in Europe and a world-scale operator," said Russell Leavitt, analyst with Salomon Bros.

The appliance industry has seen a series of big purchases in the current round of consolidation. Among major purchases, Electrolux bought the White Consolidated line of appliances in 1986 and purchased the appliance division of the British group Thorn EMI last year.

Whirlpool, meanwhile, bought the KitchenAid line in 1986 from Dart & Kraft. It attempted to purchase Roper Corp. last year but was beaten out by General Electric, although it did win the right to use the Roper name.

Industry analysts said the moves would help bring new energy to Whirlpool, which has faced some snags in its strategy.

Whirlpool, based in Benton Harbor, Mich., said last month that it expected its 1988 appliance sales to fall from the record levels in 1987 due to a slowdown in the construction of new housing.

Whirlpool held talks with Philips in 1986 and 1987 on a joint venture for appliances but those negotiations broke down, apparently due to problems relating to quickly changing exchange rates.

Whirlpool manufactures appliances under the KitchenAid, Sears, Roper and Kenmore brand names as well as under its own name. It already has investments in three appliance companies in Brazil as well as Inglis of Canada. Sales through Sears account for about 37% of its volume.

Whirlpool is currently the second-largest U.S. appliance maker after General Electric Co., with estimated sales in 1987 of $3.95 billion, compared to GE's estimated $4.35 billion.

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