After receiving the European officials consent on Monday, Whirlpool Corporation’s (WHR) fully owned subsidiary, Whirlpool Italia Holdings S.r.l. has successfully closed on its previously announced intent to purchase majority stake in Indesit Company S.p.A. (IND) yesterday. The company has acquired a 56% stake in Indesit, which represents 61.9% of voting rights.
Following this news, shares of Whirlpool jumped 3.50% closing at $145.33 on Tuesday.
Whirlpool acquired the aforementioned stake in Indesit under two share purchase agreements entered on Jul 10 with Fineldo S.p.A., a leading producer and distributor of domestic appliances in Europe, and the Merloni family members.
Per the agreement, Fineldo agreed to sell its 42.7% 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. Moreover, Whirlpool signed an obligatory share purchase deal with some of the Merloni family members for their 13.2% stake in Indesit. Apart from this, the company partnered with individual shareholder Claudia Merloni for an additional 4.4 % stake in Indesit, which was acquired on Jul 17.
All put together, the chunk of Indesit shares acquired by Whirlpool represents a 60.4% stake in the former, with about 66.8% voting rights.
However, the acquisition of Indesit Ukraine LLC, which represents 3% of Indesit’s 2013 revenue, is still pending as it awaits approval from the Ukrainian antitrust authority. Nevertheless, a verdict on the same is expected by year-end.
The acquisition of Indesit by Whirlpool is likely to bring synergies for both the companies. 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, promising sustainable growth in the region. The combination of the two companies will also 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.
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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