The news over the last week that Ali Group was attempting to oust its industry nemesis, the Middleby Group, from what seemed to be a sealed deal to buyout Welbilt, has added an extra frisson to what would have been a major market move anyway.
The agreement as it stood would have seen the two US-headquartered brands join forces to create a new global leader in catering equipment sales. Before Covid, Middleby’s revenue stood at about US$2bn, while Welbilt’s turnover totalled about US$1.6bn. Their combined earnings of US$3.6bn would have eclipsed the current manufacturer leader, Hoshizaki, at US$2.5bn (pre-pandemic anyway).
Ali Group’s alternative offer to Welbilt would achieve the same milestone, but would push it even further ahead, as its most recent pre-pandemic reporting indicated global revenue of around US$2.4bn.
I have a sneaking suspicion that this is the main reason why the European-headquartered catering equipment giant tabled a counteroffer, rather than an overt interest in Welbilt and its brands itself. The chance to be a spoiler in its rival’s quest for the number one spot proved too tempting to refuse.
Looking at both bids, Middleby Group’s deal is said to be worth $4.3bn (£3.08bn). Ali Group knew that it had to try and gazump its US rival to get a look-in, and so its offer is significantly higher – a 47% premium on the share price prior to the day’s trading when Middleby’s offer was agreed.
While we don’t know how long Welbilt and Middleby have been informally discussing a merger, we do know that a formal agreement was proposed on 20 April, according to the official form filed with the US Securities and Exchange Commission. Ali Group then became the Johnny-come-lately of the party, submitting its unsolicited offer on 25 May.
The original Middleby agreement would have seen the takeover scheduled to close in late 2021, but now that Ali Group has thrown a spanner in the works, it could disrupt the whole timescale, whichever way Welbilt decides to go.
However, Welbilt has so far remained tight-lipped on which bid it is looking at more favourably, only confirming that both proposals are essentially valid. The firm is now cast in the role of kingmaker, and its decision could have far-reaching consequences. Does it plump for the established deal with Middleby Group and make good on all the relationship-building work behind the scenes, or does it deliver greater dividends to its shareholders with Ali Group’s higher offer?
Whatever Welbilt decides, one industry giant is going to have its nose put out of joint. The UK catering equipment sector will be watching along with interest. Let battle commence!