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Whirlpool Takes First Step Toward the Acquisition of Indesit

Zacks Equity Research

Whirlpool Corp. (WHR) yesterday completed the first leg of share purchase under the deal signed last week to attain 66.8% stake in Indesit Company S.p.A. (IND). The company bought the 4.4% stake held by individual shareholder, Claudia Merloni, had agreed upon earlier.

Further, the company stated that it awaits judicial and antitrust approvals before acquiring the remaining shares under the deal. The acquisition is expected to close by late 2014.

Last week, Whirlpool and Fineldo penned an agreement per which the latter will sell its stake in Italy’s Indesit Company S.p.A. (IND) to the leading worldwide home appliances producer for $1.03 billion. Fineldo, being a holding company, had a controlling interest in the Merloni family-owned Indesit, which is a leading producer and distributor of domestic appliances in Europe.

Also, Whirlpool entered into an obligatory share purchase deal with some members of the Merloni family, for their shares in Indesit. Whirlpool’s agreement with Fineldo involves a 42.7% stake in Indesit, whereas its acquisition of the Merloni family shares will secure 13.2% stake.

Additionally, the company partnered with individual shareholder Claudia Merloni for her 4.4 % stake in Indesit. Together, this chunk of Indesit shares to be obtained by Whirlpool represents a 66.8% voting rights in the company.

In all the aforementioned share purchase agreements, shares will be bought at a price of $15.06 a share, with the exception of the Fineldo agreement in which the share price will be subject to various adjustments. Whirlpool intends to sponsor these purchases with cash, coupled with debt financing from private, domestic and global sources.

The acquisition is likely to bring synergies for both Whirlpool and Indesit. Whirlpool’s exclusive quality-oriented perspective toward achieving long-term growth along with its recognition on a global platform is likely to be a suitable partner for Indesit. On the other hand, the acquisition of Indesit will facilitate Whirlpool to solidify and maintain its foothold in the European appliances market.

Moreover, the combination of the two companies will enable them to undertake investments in technology and innovations, which will further enhance their efficiency. However, Whirlpool currently carries a Zacks Rank #4 (Sell), as its adjusted earnings per share came in at $2.20 in the first quarter of 2014, way below the Zacks Consensus Estimate of $2.30.

However, other-better ranked retail stocks to consider include Christopher & Banks Corp. (CBK), Citi Trends Inc. (CTRN) and The Men's Wearhouse Inc. (MW), each carrying a Zacks Rank #1 (Strong Buy).

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