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Manitowoc Co. Wins Enodis; Company Has Top Bid for Food Equipment Maker

July 1, 2008

By RICK BARRETT

The bidding war for cooking equipment supplier Enodis PLC ended Monday when Manitowoc Co. won an auction to purchase the British firm for $2.7 billion, beating out rival suitor Illinois Tool Works.

Manitowoc, which makes ships, cranes and ice machines, will pay 328 pence per share (about $6.56) for Enodis, which is nearly double what the shares were selling for in April before Manitowoc renewed an attempt to acquire the company.

Enodis has a range of food-service products, including cooking equipment, refrigeration units, ice machines and beverage dispensers used in fast-food restaurants, institutions and grocery stores. It has fought off a series of takeover bids over the past two years.

The London-based company, which supplies equipment to McDonald’s Corp., was at the center of a bidding war between Manitowoc and Illinois Tool Works, of Glenview, Ill., for the top spot in a $16.6 billion food equipment industry.

Enodis would more than triple Manitowoc’s annual food-equipment sales to more than $2 billion and make it one of the largest companies of its kind.

It would add restaurant fryers and other hot-food equipment to Manitowoc’s lineup of ice machines and refrigeration machines used by many of the same customers. The acquisition, which is expected to close as early as October, also would boost Manitowoc’s presence in Europe, where it has only a small share of the food equipment industry.

“It’s a great milestone for us. We are feeling good about it,” said Carl Laurino, Manitowoc’s chief financial officer.

“If you have confidence in the management, in the long term it’s going to be a good acquisition,” added George Reis, of George V. Reis Investment Group in Two Rivers.

In 2006, Manitowoc scrapped a $1.5 billion takeover bid for Enodis amid regulatory concerns about product overlap in areas including ice machines. The failed bid was one of three that Enodis attracted that year.

In April, Manitowoc renewed its interest in Enodis when it made an offer of 260 pence ($5.09) per share, which was accepted by the British company.

However, Enodis changed allegiance when Illinois Tool Works offered 282 pence per share, or about $2 billion, in May.

Manitowoc then raised its offer to 294 pence a share, or about $2.1 billion, which prompted the British government to order an auction to settle the bidding war.

“Because of the value that we see in the business, and what we think that we can do with it, we put our best foot forward,” Laurino said.

Even at the higher price, the strategic benefits of combining the two companies are significant, Glen Tellock, Manitowoc president and CEO, added in a written statement.

Long term, acquiring Enodis might give Manitowoc more financial stability. The crane division accounts for about 80% of company sales, but a downturn in the crane industry could dramatically increase the importance of its food equipment or shipbuilding operations.

But recently, Manitowoc investors have been more interested in cranes than acquiring a food equipment manufacturer. In May, the company’s shares rose on news that it was outbid for Enodis by Illinois Tool Works.

Some investors bailed out of Manitowoc’s stock when the bidding war heated up. Before the announcement Monday, the shares closed at $32.53, up 1%, and were declining in after-hours trading. In the past 52 weeks, the shares have traded in a range between $30.07 and $51.49 a share.

“It will be interesting to see what the market has to say about it (today). My view on it is the market has backed off a little on the stock,” Reis said.

Manitowoc said it believes the merged companies would result in more than $80 million in annual cost-savings synergies.

The deal is expected to close in the fourth quarter, pending approval of Enodis shareholders. “Their board has already indicated that they have accepted our bid and will recommend it to their shareholders,” Laurino said, adding that shareholder approval will probably take place in August.

Enodis, which has manufacturing plants in North America, Europe and Asia, employs about 6,800 people. More than 70% of the company’s sales are in North America, and the company has corporate offices in Tampa, Fla.

“Their brands are very strong, and that attracted us as well as the geographic footprint they have,” Laurino said.

Losing bidder Illinois Tool Works makes kitchen equipment but not ice machines. The company has more than 800 business units in 49 countries, and in Wisconsin owns three welding equipment companies in Appleton, a manufacturing company in Hartland and companies in Green Bay, Chippewa Falls and Iron Ridge.

While acknowledging that it faces “extreme headwinds” from rising raw-materials costs, Manitowoc reaffirmed its previous earnings guidance of $3.20 to $3.40 a share this year, excluding the acquisition.

The deal still requires U.K. court approval. But if it closes as expected, Manitowoc said it believes the acquisition will add to its earnings per share in 2009.

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