Shares of Maytag (NYSE:MYG) jumped 5% to $16 this morning after a group made up of Bain Capital, the Blackstone Group, and Haier America bid $1.28 billion for the company. The first two are private equity firms just like Ripplewood, leader of the group who submitted a $14-per-share bid a few months ago. Haier, the largest maker of appliances in China, is the new wrinkle and brings significant credibility to this new bid.

Haier created Haier America in 1999 to expand its global presence. In fact, it recently constructed a $40 million refrigerator-manufacturing facility in Camden, S.C., which happens to be a very business-friendly state. So adding a well-known brand like Maytag to a lower cost structure would be a great thing for them.

Maytag's cost structure, however, has been posing a significant problem. While sales have been expanding, gross margins have declined 11 percentage points in four years. Without good gross margins, very little money drops to the bottom line because selling, general, and administrative costs are essentially fixed.

Snapping up Maytag would make Haier a serious player with a well-rounded product line against the likes of General Electric (NYSE:GE), Whirlpool (NYSE:WHR), and LG Electronics. But is $16 as far as Haier can go?

Using lower cost manufacturing, Haier America could expand gross margins back to 20% levels. In addition, Haier America already has relationships with retailers such as Home Depot (NYSE:HD), Lowe's (NYSE:LOW), and Best Buy (NYSE:BBY). So there may be some SG&A synergies to capitalize on, too. Expanding net margins could get free cash flow back to $200 million.

Let's say the shareholders demand a 15% return on investment and expect free cash flow to grow 5%. Using a constant growth dividend discount model, the implied value is $2.1 billion, meaning bids could possibly go as high as $26 per share. Although my calculation is pretty crude, it is not unreasonable. That leads me to believe that the Haier group, which is more likely to operate the business rather than cash it in, can expand its bid past $17.50 and still generate great returns.

Maytag says it will take eight weeks, with help from Merrill Lynch (NYSE:MER), to assess the new bid. That is certainly the right move for the benefit of shareholders.

So the Ripplewood group has eight weeks to determine what their next submission will be. Let the bidding war begin!

Fool contributor David Meier owns shares of GE. He does not own shares in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.