Bigger piece of pie sought
16.04.2008 02:25
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- Source: JS Online
Manitowoc Co.'s $2.1 billion offer for a British food-equipment manufacturer would create the largest company of its kind for products such as ice machines and restaurant fryers, Manitowoc CEO Glen Tellock said Monday. Combined, the two businesses would have about $2 billion in annual revenue - up from $438 million that Manitowoc's food-equipment division had in 2007. The acquisition of London-based Enodis PLC also would boost Manitowoc's presence in Europe, where it has only a small share of the food-equipment industry. Combined, the two companies would have manufacturing plants in 10 countries and a customer list that includes some of the world's biggest restaurant chains, such as McDonald's and Subway. Tellock said the benefits of merging the two companies are more compelling now than they were in 2006, when Manitowoc failed in an attempt to buy Enodis for $1.5 billion. "We see what transforming a regional specialty business into a global offering can deliver," he said. "When you look at the growth in (Enodis') business over the past two years . . . it's as good of a deal, if not better, than the last time around." Construction cranes are Manitowoc's biggest business and account for 81% of the company's revenue. But the food-equipment division and a division that builds ships are still integral parts of the company's growth strategy even if they are eclipsed by cranes. Manitowoc is one of the world's largest builders of ice machines. After the acquisition, revenue from ice machines and other food equipment would account for 36% of the company's total - up from 11% now. The deal would get Manitowoc into the hot-food equipment business, as Enodis makes restaurant grills, fryers and pasta-cooking equipment as well as ice machines and beverage machines. It would help balance Manitowoc's business portfolio and would reduce the dependency on cranes, according to analyst Robert McCarthy with Robert W. Baird & Co. "The acquisition would also increase Manitowoc's foodservice international exposure. Enodis generates 30% of its revenue in Europe and Asia," McCarthy writes in a note to investors. Manitowoc's offer of 260 pence, or $5.12 a share, in cash for Enodis represents a big premium over the recent value of the stock. Previous attemptMcCarthy said that while the addition of the U.K. firm in Manitowoc's portfolio makes "excellent strategic sense," the proposed price for the company is steep, and the high level of debt adds near-term risk to Manitowoc shares. It's a fair price for the British competitor, according to Tellock, partly because Enodis' business has grown in the past two years. The previous takeover attempt was scrapped amid regulatory concerns about product overlap in areas, including ice machines. The failed bid was one of three that Enodis attracted in 2006. It's uncertain whether Manitowoc would pay more than $2.1 billion for the company. "We will have to wait and see what happens over time, if someone else is compelled to put in a competing offer," Tellock said. The acquisition is subject to approval from U.S. and European regulators, and Manitowoc has agreed to take all of the steps necessary to get the approvals. If the conditions aren't met, Manitowoc will pay Enodis a $50 million termination fee. The two companies are confident that they've addressed previous issues, Tellock said. "We have better information than we had in 2006 . . . and we have a better understanding of the risks," he said in a conference call with analysts. Enodis shareholders are scheduled to vote on the takeover this summer. Manitowoc said the acquisition is expected to add to earnings per share in 2009 and has reaffirmed its 2008 earnings outlook of $3.20 to $3.40 per share. Monday, Manitowoc shares closed at $39.66, down 86 cents.
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