14.04.2008

Manitowoc buys big in food

Manitowoc has reach an agreement to acquire British based food equipment business, Enodis in a transaction valued at around $2.1 billion, including the assumption of Enodis' net debt of approximately $207 million.

The deal has been unanimously approved by both companies' boards of directors, and is based on a cash payment of 258 pence per Enodis share. Enodis will also pay a dividend of two pence per share prior to closing in lieu of an interim dividend for the current financial year.

The acquisition is expected to close in the fourth quarter and is subject to approval by Enodis shareholders and the UK and other regulatory authorities.

While Enodis is listed in London its operational headquarters are located in Tampa, Florida. The company manufactures commercial foodservice equipment under a variety of brands. The company had revenues of £800 million ($1.6 billion) in the year to the end of September 2007.

Manitowoc says that the combination of Enodis and Manitowoc will allow it to enter two major new market segments, hot foodservice and food retail equipment, as well as expand its cold-side businesses.

Glen E. Tellock, Manitowoc president and chief executive officer said: "We have long recognised the value that a combination of the foodservice businesses of Enodis and Manitowoc would create. We believe the strategic benefits of the combination are substantial, and we are pleased to have reached an agreement for this transforming acquisition."

"We believe the offer price provides good value to Enodis' shareholders while also allowing Manitowoc's shareholders to realize the benefits that the enhanced global business platform is expected to generate through deeper customer relationships, a more robust R&D process, and operating synergies."

Manitowoc expects the merger will generate annual synergies of over $60 million by 2010. Historical revenues for the combined companies for the most recently completed respective financial years exceeds $5.6 billion.

Vertikal Comment

Manitowoc took a run at Enodis in the summer of 2006 but eventually dropped the deal. Its success now changes a great deal at Manitowoc. The company was rapidly becoming a large crane manufacturing business with a small ice making and shipyard rump.
See Manitowoc drops Enodis bid
With this takeover the crane business will drop from being 81 percent of group revenues to around 40 percent, based a full year’s contribution from Enodis.

In a future cyclical crane business slow down will the company come under pressure from shareholders to drop the cranes in order to focus on its ‘core’ food business? It nearly happened in the 1980’s.

When challenges next face the corporation analysts are bound to question the rationale of combining food equipment with cranes, not to mention shipbuilding.

On the other hand if Tellock can do with the food business what he has done with cranes - without loosing any momentum in the crane market, food and cranes will be seen as a logical combination. After all Liebherr does it.