Qingdao Haier Ltd.: Considering the Maytag Acquisition
We are paying great attention to events concerning the acquisition of Maytag, but bare so far made no decisions yet.
In early June 2005, senior executives at Qingdao Haier Ltd., China’s largest home appliance maker, faced a major decision. They had to determine whether or not to bid on the purchase of Maytag Corporation, the third-largest tl.S. home appliance manufacturer. In May, a private U.S.-based investment group made a $1.13 billion bid to acquire Maytag which the company agreed to consider. Maytag’s Board of Directors was willing to entertain competitive offers.
Acquiring a venerable company like Maytag would put I laicr (pronounced I IK il 1ER) on the same stage as Lenovo Group Ltd., China’s largest computer manufacturer Lenovo bought IBM’s personal computer business for S1.75 billion in late 200-t. and became the world’s third-largest producer of PCs behind Dell and Hewlett-Packard. The Maytag acquisition would elevate Haicr’s major home appliance market position in the United States and worldwide.
A decision by Haier to purchase Maytag would be consistent with the Chinese government’s encouragement of its large companies to consider overseas acquisitions for the purpose of turning these companies into transnational corporations featuring a single corporate global brand name. For example, IBM PCs would be marketed under the Lenovo name. The Chinese government has named Haier as one of six domestic companies it hoped to transform into one of the world’s top 500 companies by 2010. According to Haier’s vice-president of marketing, “We really want (Haier) to become a first-class brand. It’s our business strategy.“1
A decision to purchase Maytag would depend heavily on competitive issues and the marketing opportunity that the Maytag business and assets could provide Haler in the United States and worldwide. At the same time, the strengths and resources that Haier could bring to Maytag warranted consideration. Even though Maytag’s market

2. Should Haier market Maytag’s current brand names or should Haier replace Maytag brands with the Haier corporate brand Name?
· merits of global branding, multi-product brand
· pros and cons for marketing vs. replacing Maytag’s current brand names
3. How much is the Maytag Corporation approximately worth? If Haier submitted a bid for Maytag, what would be a bid price?
· from a financial perspective (price-earning or P/E ratio):
Ø market value = “multiple” x EPS x common shares outstanding
Ø industry “multiples” ranges from 16-21
Ø projected earning-per-share: $.54 (2005), $.75 (2006), and $.80 (2007)
Ø common share outstanding = dollar value of bid ($1,13 billion)/share price bid ($14)
· What the biding price is actually buying (tangible and intangible) based on Maytag’s consolidated balance sheet for 2004 (Exhibit 8A)?
· from a strategic perspective (how much is the Maytag worth to Haier) — benefits, cost and opportunity cost
Answer each question seprerately in an organized way. only use info from case.