The Middleby Corporation To Acquire Welbilt, Inc.
Apr. 21, 2021
Combination will create a premier food equipment company with a leading commercial foodservice portfolio
Combined business is well positioned to deliver enhanced value for customers through complementary, best-in-class products, unmatched service and forward-thinking technology solutions
Accelerates key investments in new product development, aftermarket capabilities, connectivity and digital solutions
Expands international operations, particularly in higher-growth regions across the globe
Clear path to driving $120 million in operational improvement with $100 million run-rate cost synergies and additional $20 million in Welbilt stand-alone Business Transformation Program annual improvement
Immediately accretive to adjusted EPS with greater than 10% annual accretion by year two
Equity consideration mix maintains the Middleby balance sheet flexibility and reserves capacity
for future strategic investments in the business, M&A or stock buybacks
The combined company will have approximately $3.7 billion in combined 2020 sales, 73% of which will come from the Commercial Foodservice segment. With a strong balance sheet and robust cash generation, Middleby will be well positioned and capitalized to support significant R&D and future acquisition opportunities. Middleby has a long track record of successfully integrating businesses, having completed over 20 acquisitions since 2018, and has a history of driving efficiencies in acquired companies.
Compelling Strategic Rationale
Creates a broad Commercial Foodservice Equipment platform with enhanced ability to serve customers through a combination of distinct but complementary portfolios with leading brands and broad geographic footprint
Strengthens customer value proposition across hot-side, cold-side, beverage, technology and aftermarket support services across the globe
Transaction accelerates R&D and investment into the value-added technologies and services of the future, including ventless cooking, controls, automation and connectivity
$100 million of anticipated annual cost synergies associated with the transaction to be fully realized by year three, with additional potential from cross-selling opportunities and greater product development not yet quantified; Welbilt stand-alone Business Transformation Program annual improvement of $20 million is incremental
All-stock transaction maintains the Middleby balance sheet flexibility, with significant expected combined free cash flow to support and grow the business
Expected net leverage at close of ~3.0x, to be reduced to approximately ~2.0x by the end of 2022
A landmark transaction in the Middleby long-standing strategy of acquiring, integrating and operating complementary and synergistic businesses
“Today’s announcement represents a milestone event for Middleby, Welbilt and the Commercial Foodservice Equipment industry. The combination of our two great companies creates a leading player with a comprehensive product line, global footprint and advanced technologies and solutions that are well positioned to serve our rapidly changing customer needs and capitalize on emerging industry trends. The acquisition of Welbilt is a transformational opportunity for Middleby and a compelling combination that will benefit all of our stakeholders,” said Middleby CEO Timothy FitzGerald. “We are excited to welcome the Welbilt team and we will benefit from the highly talented group they have assembled.”
William Johnson, CEO of Welbilt, said “We are pleased to combine with Middleby to offer our customers a broad and innovative portfolio of products and technologies. This transaction will allow Welbilt to accelerate our strategic development and represents an outstanding opportunity for Welbilt shareholders to realize an attractive value and participate in the future value creation of the combined organization. I am pleased to be joining the Middleby Board of Directors upon closing of the transaction to support a successful combination of the businesses.”
Under the terms of the agreement, Welbilt shareholders will receive a fixed exchange ratio of 0.1240x shares of Middleby common stock for each share of Welbilt common stock in an all-stock transaction, with an implied enterprise value of $4.3 billion. Based on Middleby’s volume-weighted average price during the 30 consecutive trading days ending April 20, 2021 (Middleby’s 30-day VWAP), the offer price represents a 28% premium to Welbilt’s 30-day VWAP. Upon closing, Middleby shareholders will own approximately 76 percent and Welbilt shareholders will own approximately 24 percent of the combined company on a fully diluted basis.
The Boards of both companies have unanimously approved the transaction. In addition, Carl C. Icahn (and affiliates), Welbilt’s largest shareholder with an 8.4% ownership position, has entered into a support agreement in favor of the transaction.
Governance and Management
Following closing, Timothy FitzGerald will continue as CEO and as a member of the Middleby Board of Directors. Bryan Mittelman will continue to serve as Middleby’s CFO. Middleby will expand its Board to include two new directors from the Welbilt board, Chairperson Cynthia Egnotovich and William Johnson.
Financing and Expected Timing
Middleby intends to refinance Welbilt’s existing debt through its committed Senior Secured Facility. Based on the expected pro forma leverage ratio at closing, the interest on the incremental financing would be approximately L + 162.5 bps. The transaction is expected to close in late 2021, subject to customary closing conditions, including regulatory and Middleby and Welbilt shareholder approvals.
Guggenheim Securities, LLC served as financial advisor to Middleby. Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel.
Morgan Stanley & Co. LLC served as financial advisor to Welbilt. Gibson, Dunn & Crutcher LLP served as legal counsel.
Conference Call and Webcast Details
A conference call and webcast will be held April 21, 2021 at 8:30am (Eastern Time) to discuss the combination for analysts and investors. Participants are encouraged to access the live audio webcast through the Middleby Investor Relations page at www.middleby.com or the Welbilt Investor Relations page at www.welbilt.com. If participants are unable to join through the Middleby or Welbilt websites, access to the call is available by dialing (315) 625-3077 or toll-free (888) 391-6937 and using conference ID 6508138. A presentation about the transaction is also available in the Investor Relations sections of the Middleby and Welbilt websites. A replay of the call will be available approximately two hours after the call ends and can be accessed by dialing (404) 537-3406 or (855) 859-2056 and entering conference ID 6508138.