Techtronic mops up Hoover

Analysts welcome Hong Kong-based Techtronic's plan to acquire WhirlpoolÆs Hoover floor-care business for $107 million cash.
Techtronic Industries in Hong Kong has announced it would acquire WhirlpoolÆs Hoover floor-care business for $107 million cash and the assumption of some debt, marking the latest cross-border, outbound acquisition by an Asian company of an established US brand and business.

Hoover has a range of products for general and special-purpose vacuuming including upright, canisters, deep cleaners and hard-floor cleaners. Techtronic will acquire operational control of the business including manufacturing in Ohio, Texas and Mexico.

The companies have not disclosed details of the liabilities that Techtronic will assume but analysts reckon they are long tenure, mostly pension-related liabilities and will equal around $70 million. As per the terms of the deal, Whirlpool will retain the liabilities related to pension and post-retirement plans for currently retired Hoover employees. Techtronic will be the fourth owner of the Hoover brand, which is almost a century old.

The deal, which was announced on Thursday (December 7), is subject to regulatory approvals and is expected to close in the first quarter of 2007. Other buyers in the fray for the Hoover business included private equity firms and an employee consortium through an employee stock ownership plan.

Hong Kong-based Techtronic was set up more than 20 years ago and supplies home improvement and construction tools including power equipment products, floor-care appliances, laser and electronic products. Its brands include Milwaukee, AEG, Ryobi, Homelite, Royal, Dirt Devil, Regina and Vax floor-care appliances.

Horst J Pudwill, chairman and CEO of Techtronic, says: ôThe Hoover name is one of the most recognised brands in the world. The addition of Hoover to our existing floor care business will strengthen our market presence globally, by diversifying our customer base, expanding our product offering and adding scale to our operations.ö

Whirlpool chairman and CEO, Jeff M Fettig, says: ôThe decision to divest the floor-care business allows us to focus on our core appliance business.ö Fettig was repeating a comment he made in May when Whirlpool announced plans to divest Hoover and other identified Maytag businesses including Dixie-Narco vending systems, Amana commercial microwave and Jade commercial products appliance businesses. The Dixie-Narco and Amana divestitures have been completed and Jade is in process.

Whirlpool acquired Hoover as part of an acquisition of Maytag completed in March this year. Analysts in the US commented that the Hoover division had been under increasing pressure from competitors such as Target and Sears who have moved most of their manufacturing to lower cost geographies and are thus able to price them considerably cheaper than the Hoover range.

Analysts were generally positive following the Techtronic announcement. Cazenove said on December 8 it would maintain its outperform rating on Techtronic saying it ôexpects significant synergies over time given Techtronic already has large-scale floor-care manufacturing facilitiesö and highlighting ôHooverÆs strong brand name and potential for synergiesö. JPMorgan Chase research was more guarded, drawing attention to the "challenge of integration" and the ômajor restructuringö which could be required. However, despite these concerns, the firm also maintained an overweight rating on Techtronic.

Merrill Lynch advised Techtronic on the acquisition. Lazard advised Whirlpool.
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