Whirlpool Italia Holdings S.r.l., a fully owned subsidiary of Whirlpool Corp. (WHR), has received the ratification of the European Commission to go ahead with its previously announced acquisition of a majority stake in Indesit Company S.p.A. (IND). This marks the clearance of a major hurdle in concluding the acquisition of Indesit’s shares from Fineldo S.p.A. as agreed upon on Jul 10.
Per the agreement, Fineldo will sell its stake in Italy’s Indesit Company to Whirlpool for $1.03 billion. Fineldo, being a holding company, has a controlling interest in the Merloni family-owned Indesit, a leading producer and distributor of domestic appliances in Europe.
Also, Whirlpool entered into an obligatory share purchase deal with some of the Merloni family members. Whirlpool’s agreement with Fineldo involved the acquisition of the latter’s 42.7% stake in Indesit, whereas from the Merloni family the company secured a 13.2% stake. Additionally, the company partnered with individual shareholder Claudia Merloni for a 4.4 % stake in Indesit.
Together, the chunk of Indesit shares acquired by Whirlpool represents 66.8% voting rights in the company. However, the acquisition, which is anticipated to close by late 2014, awaits judicial and antitrust approvals.
In all the aforementioned 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.
Subsequent to these agreements, on Jul 17, Whirlpool completed the first leg of share purchase under the deal by acquiring Claudia Merloni’s 4.4% stake.
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 make it a suitable partner for Indesit. On the other hand, the acquisition of Indesit will help 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 DSW Inc. (DSW), each carrying a Zacks Rank #1 (Strong Buy).
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