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Hot Company

Selim Bassoul
President and CEO, The Middleby Corporation
Elgin - IL US

Tell us what you do (or what your team or organization does) and the specific challenge you faced.
In 1999 when I became COO of The Middleby Corporation, the company was in the midst of its worst financial performance ever. So, during my first 90 days I shed $25 million in sales to focus on our core competency—the hot side of the cooking equipment manufacturing industry. Also 10,000 SKUs were cut from production and 30 percent of Middleby’s workforce was let go. Rumors circulated that the company was headed for bankruptcy. But, I was not preparing for bankruptcy—in fact, quite the opposite. I was re-positioning Middleby for long-term growth. Today the company sees the results of those tough decisions made years ago. When I became CEO in 2001, I continued to focus the company on a core product group of “hot side” cooking equipment in a competitive market. Our experienced management team including Dave Baker (CAO) and Tim Fitzgerald (CFO) concentrated on working capital management and cost control while remaining customer driven. My strategy also included bringing new products to market quickly, mending soured customer relationships and hiring the best employees. Layers of management were eliminated and I began to know many employees on a personal level.

What was your moment of truth?
In early 2000, it was becoming evident to our stakeholders that management’s goal was not simply to return to profitability, but to become a leader in our industry. Our defining moment was in late November 2001, when the most significant and boldest strategy in the company’s 100-year history was announced. As CEO, I spearheaded the acquisition of Blodgett Corp. for $95 million from Maytag. Blodgett was larger than Middleby, but I saw many synergies between the two companies. While Middleby was strong in the pizza and casual dining markets, Blodgett was a leader in other markets, including fast food. The companies complemented each other and opened up cross-selling opportunities between many brands and products. Securing financing for the acquisition of Blodgett in the 4Q of 2001 was challenging, but we recognized this transaction as a critical company crossroads despite the high cost. Middleby’s financials were still in a transition phase and Blodgett was in poor financial condition while the overall impact of 9/11 lead to an extremely tight credit market. Despite this, we were secured adequate financing, making this deal one of the few M&A transactions completed in the fourth quarter of 2001. Despite the high cost and unfavorable circumstances, we knew this acquisition defined the future of Middleby. After the acquisition, Middleby became the industry leader and was #1 in many key product areas including ovens, broilers, toasters, and warmers. The company also doubled its market share while Blodgett was immediately accretive to Middleby’s earnings.

What were the results?
• Revenues up 75 percent 1998-2002 • Doubled market share and become the industry leader • Posted record quarters throughout 2002 and 2003. Stock price rose from 6 to 34 in 11/03 • New product introduction cycle to market cut from18 to 9 months • Developed new, patented products; eight will be introduced by March, 2004. • Developed overseas sales infrastructure. Today 20 percent of sales are from overseas • Changed company financial emphasis to profit per employee and EBIDA as a percentage of sales; eliminated management layers from 7 to 3 • Customers today include nearly every major restaurant chain