Everybody seems to want to get a hold of the Maytag (NYSE:MYG) repairman these days. The already crowded bidding war intensified over the weekend, when Whirlpool (NYSE:WHR) raised its bid for the troubled appliance giant to $18 a share.
This chapter would probably end there if not for one interesting tidbit: Whirlpool was already the high bidder. Pulling the kind of auction maneuver that even a spaced-out eBay junkie would find unfathomable, Whirlpool was simply trumping its own bid of $17, placed a week earlier.
If you're an investor in any public company -- and I'm guessing that you might be -- this story has to be pretty disheartening on many different levels. Maytag was first offered a bid to be taken private by Ripplewood Holdings for $14 a pop back in May. A month later, a group led by China's largest appliance company came in with a $16-per-share proposal. Earlier this month Whirlpool upped the ante to $17.
Once Whirlpool made its offer, China's Haier America consortium backed out. Everyone knew Maytag had seen better days. That's why it was up for sale in the first place. There was no reason to overpay for a company that had seen its stock temporarily dip into the single digits back in April.
However, the real clincher here is that Haier may have been more fearful of the original $14 offer than of Whirlpool's $17. That's because Maytag's board has favored the original proposal all along. The board was open to considering higher offers, but it was more than ready to sell its shareholders down the river at $14 a head.
That's pretty sad. Whirlpool raised its offer to $18 not because it was bidding against itself, but to create an even wider disparity between its bid and the $14 offer that Maytag has been leaning toward since May.
This isn't all that different from when Hollywood Entertainment's board voiced its support in favor of a buyout bid from Movie Gallery (NASDAQ:MOVI), even though Blockbuster (NYSE:BBI) was at one time offering more. In the cruise-line space, P&O Princess initially favored a lower bid from Royal Caribbean (NYSE:RCL) before agreeing to a meatier unsolicited Carnival (NYSE:CCL) offer two years ago.
Do boards know best when they fancy a lower offer? Maybe they see the better strategic fit. Maybe they are in a better position to see any regulatory hurdles that may unhinge a potential union.
Hogwash!
More often than not, boards will favor a lower bid just because the others either came later or were unsolicited. It's a case of selfish pride overtaking what should be the prime objective -- growing shareholder value. Besides, since most of these bidding wars erupt over troubled companies in a state of disarray, what kind of credence should one lend to the vision of the present board of directions? Not much.
This is an insult to Maytag investors. It's an affront to Whirlpool. Will someone please dispatch the Maytag repairman off to his company's boardroom to knock a little sense into his bosses?
Here is how the Maytag saga has played out so far:
- Whirlpool was the top bidder even before it raised its own buyout proposal.
- The line for prospective suitors stretches a long way back.
- If the company doesn't choose quickly, it may wind up as an old maid.
eBay is a Motley Fool Stock Advisor selection.
Longtime Fool contributor Rick Munarriz is grateful for the appliances in his home. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy .
