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Whirlpool Boosts Europe Presence through Indesit Stake Buy - Analyst Blog

Posted: 7/14/2014 7:10:00 PM
Referenced Stocks: IND;WHR;CBK;CTRN;MW

Shares of Whirlpool Corp. ( WHR ) climbed 1.1% after the leading worldwide home appliances producer declared its latest agreement with Fineldo S.p.A.

The two companies penned an agreement per which Fineldo will sell its stake in Italy'sIndesit Company S.p.A. (IND) to Whirlpool for $1.03 billion. Fineldo, being a holding company, had a controlling interest in the Merloni family-owned Indesit, which is 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, for their shares in Indesit. Whirlpool's agreement with Fineldo involved a 42.7% stake in Indesit, whereas its acquisition of Merloni family shares secured 13.2% stake for Whirlpool. Additionally, the company partnered with individual shareholder Claudia Merloni for a 4.4 % stake in Indesit.

Together, this chunk of Indesit shares represents 66.8% voting rights in the company. However, the acquisition will await judicial and antitrust approvals, and is anticipated to close by late 2014.

In all the aforementioned share purchase 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. Whirlpool intends to sponsor these purchases with cash, coupled with debt financing from private, domestic and global sources.

The acquisition is likely to bring synergies for both Whirlpool and Indesit. Whirlpool's exclusive quality-oriented perspective towards achieving long-term growth along with its recognition on a global platform is likely to be a suitable partner for Indesit. On the other hand, the acquisition of Indesit will facilitate 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 The Men's Wearhouse, Inc. ( MW ), each carrying a Zacks Rank #1 (Strong Buy).

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