Billion-selling Pasco Welbilt receives competing bid
Weeks after agreeing to sell in a deal worth over $ 4 billion, one of Tampa Bay’s largest public companies received a competing – and potentially greater – cash offer of ‘an Italian company.
Welbilt Inc. of New Port Richey, which manufactures and supplies catering and professional cooking equipment, received an offer last week from Italian holding company Ali Group that would pay more per share than a stock deal with Middleby Corp. ., based in Illinois, in April.
Under the deal, Middleby would trade its shares for Welbilt shares at $ 20.38 per share, a premium of almost 28% over the company’s stock price at mid-April 15, $ 98. Middleby would also assume $ 1.5 billion in Welbilt debt, according to a filing with the U.S. Securities and Exchange Commission on Friday, bringing the total value of the transaction to $ 4.7 billion. That’s $ 400 million more than when the deal was first announced on April 21.
Ali Group’s offer would pay shareholders $ 23 per share in cash, a 44% increase from its mid-April price. That would put its total cash supply at nearly $ 3.3 billion.
Welbilt’s board of directors met on Friday and determined that from a financial point of view the Ali group’s offer was “reasonably likely” to exceed Middleby’s, according to the Security and Exchange Commission file .
So far, the board has always recommended that shareholders approve the Middleby deal. But depending on the parameters of this agreement, they can change this recommendation at any time. Welbilt is expected to pay a $ 110 million termination fee to break its contract with Middleby.
A Welbilt spokesperson said the company would conduct due diligence on the Ali Group deal in the coming weeks, but there had not been negotiations yet and there had been no timeline for a decision. The company also declined to comment on the offer.
Late competitor deals like those from the Ali Group aren’t particularly common, said Zac Smith, senior vice president at Embark, a financial advisory firm that works on business mergers and acquisitions. But when they do happen, they could start a bidding war.
“It depends on how aggressive the boards are and whether or not they want to taint the relationship,” Smith said.
There are reasons why Welbilt’s board might turn down an offer with a higher value per share, but potentially less aggregate, Smith said. The company could determine that the Middleby deal would create enough synergistic savings and enough market share to push the value of their shares beyond the Ali Group offer of $ 23 per share.
“With this combined company, the value of the stock could potentially double or triple if the combination of the two companies is successful,” Smith said. “That’s why someone would want to take the stock offer for the money today. “
Smith said Welbilt’s due diligence would include a more in-depth review of the Ali group’s financial data, including whether new debt would be placed on Welbilt’s books or theirs. He would also examine whether the cost savings offered by the Ali Group compare to those offered by Middleby and how the Ali Group’s market share aligns with its own.
In a statement, Middleby CEO Tim FitzGerald said Ali Group’s proposal faced “funding uncertainty”, calling it “highly opportunistic and conditional.”
“Middleby remains firmly committed to completing our merger project with Welbilt,” said FitzGerald. “We believe that the Middleby and Welbilt combination can be achieved with a high degree of certainty and deliver superior value to Welbilt shareholders. Ali Group’s non-binding proposal comes with a number of conditions, challenges and risks, all of which increase the uncertainty of whether to complete a transaction.
In its own statement, the Ali Group said the company said it has financial backing from Goldman Sachs International.
“Our proposal of $ 23 per share offers significant bonus cash value to Welbilt shareholders and is superior in all respects to Welbilt’s pending transaction with Middleby,” the statement said. “In addition to superior value, our proposition provides greater certainty of closing for Welbilt and its shareholders. We and our advisors look forward to working with Welbilt and its advisers to quickly negotiate and finalize a final agreement. “
The Ali Group statement also said it was unlikely to face the same antitrust review of a Welbilt-Middleby deal. On an April call about the deal, a number of investment analysts raised questions about whether the government would approve a merger between two of the restaurant industry’s largest equipment suppliers. . FitzGerald and Welbilt CEO William Johnson said they were confident the deal would be done at the time.
Despite the impact of the coronavirus pandemic on restaurant revenues, Welbilt achieved net sales of $ 1.1 billion in 2019, making it one of the most profitable public companies in Tampa Bay . Locally, it keeps a relatively low profile; only about 150 of its 4,400 employees are based in Tampa Bay.
Founded in 1963, the Ali group has 80 brands and 10,000 employees worldwide, as well as 58 manufacturing sites on four continents.
Middleby has approximately 9,300 employees, more than half of whom are in the United States. The company achieved net sales of $ 2.5 billion in 2020.
Welbilt stock, which was trading at $ 3.99 per share at the start of the pandemic, hit a five-year high of $ 24.77 on Tuesday morning. Middleby’s shares edged up to $ 167.85 just before noon, from $ 181.99 on the day the Welbilt deal was announced.