DEALTALK-Whirlpool's Maytag purchase succeeds, defies critics

By Karen Jacobs

ATLANTA, Feb 12 (Reuters) - Whirlpool Corp (WHR.N: Quote, Profile, Research) is defying critics who said its highly scrutinized acquisition of smaller rival Maytag would never work.

The world's biggest appliance maker reported a 41 percent rise in annual net earnings to $8.01 a share last week, and said cost savings from the 2006 acquisition came to $460 million in 2007, $60 million more than originally projected, a year earlier than it expected.

The company also said that the Maytag brand, which had been dropped by key retailer Best Buy (BBY.N: Quote, Profile, Research) before being acquired, gained market share in the fourth quarter.

"The brand is recovering and we're now beginning to grow it," Michael Todman, president of Whirlpool North America, said in an interview.

Whirlpool's bid for its smaller rival was reviewed extensively by the U.S. Justice Department and drew attention from critics who said the projected cost savings would never materialize and that competition would be hurt if the two U.S. manufacturers were allowed to combine.

"I was included among those who thought (Whirlpool) overpaid for the company and would have a difficult time achieving the savings," said Craig Hutson, senior bond analyst with Gimme Credit LLC. "The recent earnings provide very strong evidence that the merger has been an early success."

Whirlpool initially bid $17 a share for Maytag in summer 2005 but eventually raised its offer to $21 a share, or $1.7 billion. The deal was approved in March 2006. MERGER RISKS

Other closely watched mergers have fallen apart in recent years. The 1998 Daimler-Benz "merger of equals" with Chrysler Corp unraveled when the U.S. carmaker was sold last year. Retail watchers are wondering how the 2005 merger of Kmart and Sears, Roebuck to form Sears Holdings (SHLD.O: Quote, Profile, Research) will fare in light of recent profit declines and falling sales.