Ali Group has entered a bidding war to buy out foodservice equipment manufacturer, Welbilt, after rival Middleby Corp announced in April its intention to acquire the brand.
Middleby’s proposed US$4.3bn (£3.08bn) deal would see the group closing the merger in late 2021, pending regulatory approvals and customary closing conditions.
However, Ali Group has now submitted a proposal to Welbilt’s board of directors to acquire all of the outstanding shares of Welbilt common stock for US$23.00 (£16.22) per share in cash.
This proposal would represent a premium of 47.2% to the Welbilt share price as of 20 April 2021, the last trading day prior to The Middleby Corporation’s announcement of its pending all-stock transaction with Welbilt, and a premium of approximately 13.9% to the implied value of the Middleby transaction as of 24 May 2021, the last trading day prior to Ali Group submitting its proposal to Welbilt.
Ali Group reports it has substantial cash on hand and has received a ‘Highly Confident Letter’ from Goldman Sachs International for new financing to fund the proposed transaction.
The Italian-headquartered conglomerate said it will obtain fully underwritten, binding commitment letters for any debt financing prior to signing a definitive merger agreement, which will not contain any financing condition. Ali Group is also ‘highly confident’ its proposed transaction will obtain all necessary regulatory approvals in a timely manner without what it describes as “the uncertainty created by the antitrust provisions contained in the Middleby transaction”.
Ali Group stated: “Ali Group has a 60-year history in the foodservice equipment sector and has long-admired Welbilt. Our US$23 per share proposal delivers significant cash premium value to Welbilt shareholders and is superior in every respect to Welbilt’s pending all-stock transaction with Middleby.
“In addition to superior value, our proposal offers greater certainty of closing for Welbilt and its shareholders. We and our advisors look forward to engaging with Welbilt and its advisors to quickly negotiate and finalise a definitive agreement.”
However, Middleby quickly rebuked the rival bid, reiterating its commitment to completing its proposed merger with Welbilt in the face of what it says is “the unsolicited and non-binding indication of interest from Ali Group”.
Tim FitzGerald, Middleby CEO, said: “Middleby remains firmly committed to seeing our proposed merger with Welbilt through. The Ali Group’s non-binding indication is highly opportunistic and conditional.
“We believe that the combination of Middleby and Welbilt can be completed with a high degree of certainty and deliver superior value to Welbilt’s shareholders. Ali Group’s non-binding proposal has a number of conditions, challenges and risks, all of which increase the uncertainty of achieving a completed transaction.”
He added: “We have strong confidence that the value of the proposed Middleby/Welbilt merger is far superior to Welbilt’s shareholders, allowing them to participate in the combined entity’s future growth, realisation of synergies, and our industry’s continued recovery from the Covid-19 pandemic. These upside opportunities are evidenced by the broker price targets for our company, the majority of which point to a significantly higher value to Welbilt’s shareholders.
“Through our diligence process, we have built a working relationship with the Welbilt team and believe that our organisations have a strong cultural alignment, which will benefit both organisations in the long-term. Our proposed merger is also in the best interest of not only both companies’ shareholders, but our customers, employees, distributors and other stakeholders.”
Middleby believes its deal gives US$120m (£84.6m) of synergies and operational improvements, and delivers substantial value to Welbilt’s shareholders.
The company further stated: “Middleby has completed its diligence and the shareholder and regulatory approval processes are already underway, all of which Ali Group has yet to begin; Middleby and Welbilt have additionally filed their preliminary joint proxy statement/prospectus with the SEC.
“There is uncertainty around the financing (and the terms of any such financing) that Ali Group would need to obtain to fund the proposed transaction. On the other hand, Middleby’s definitive agreement contains no financing conditions, and the combined company will maintain significant balance sheet capacity to pursue other value accretive investments benefiting both Middleby and Welbilt shareholders.
“There is significantly more uncertainty and risk associated with Ali Group’s proposal for Welbilt’s shareholders.”