© Reuters. FILE PHOTO: Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network’s Neil Cavuto show in New York, February 11, 2014. REUTERS/Brendan McDermid
By Maria Pia Quaglia
MILAN (Reuters) – Italian family business Ali Group expects its planned takeover of U.S. catering equipment rival Welbilt (NYSE:) to boost sales as Americans’ appetite for takeaways and meal delivery drives a resurgent U.S. fast-food market, the company told Reuters.
Welbilt, which makes fryers and high-speed ovens for quick-service restaurants (QSRs) and is backed by billionaire activist investor Carl Icahn, last week said that Ali Group’s sweetened takeover bid was superior to its existing agreement with bigger rival Middleby Corp.
On Tuesday Middleby said it didn’t plan to increase its bid, ending the months-long tussle between the world’s largest food-service equipment companies.
Unlisted Ali Group, which produces the Carpigiani gelato machines that are among the ice-cream machines used by McDonald’s (NYSE:), told Reuters the proposed deal would create an industry giant with turnover of $3.5 billion.
It would be the biggest deal for an Italian company in the United States in seven years, Refinitiv data shows, creating a group with a 14,000-strong workforce operating in 34 countries including the United States, Japan and New Zealand.
Ali Group said it couldn’t pass up the opportunity to acquire brands that include Frymaster fryers, Garland grills and Merrychef ovens, which quickly deliver fresh, hot food on demand in the United States.
Icahn is Welbilt’s largest shareholder with an 8.4% stake, worth a little more than $286 million based on Ali Group’s $24 per share bid.
“We joined the board and we helped to bring in the right kind of management,” Icahn said in a phone interview. “This is activism working extremely well. A year ago this stock was $6.50 and now it’s $24.”
“The transaction would roughly double the portion of our overall sales in the fast-food segment from the current 10-15% while also nearly doubling our presence in North America,” the company told Reuters, disclosing its strategy publicly for the first time.
It also said that the U.S. fast-food market has weathered the COVID-19 pandemic better than other hospitality sectors thanks to strong demand for food delivery during lockdowns.
Miller Pulse data from the beginning of March to mid-May shows average weekly U.S. restaurant sales are up nearly 15% from average 2019 levels.
“For Ali Group this is an opportunity to grow in North America,” Barclays (LON:) analyst Adam Seiden told Reuters last week.
“It’s a very fragmented market and Welbilt is one of few companies that has global scale, a product portfolio across both hot and cold equipment and relationships with large chain customers.”
North America is the biggest market for food service equipment, according to consultancy Aaron Allen & Associates.
The battle for Welbilt heated up as the hospitality industry and its suppliers began to recover from the pandemic, which the National Restaurant Association estimates shut as many as 110,000 U.S. restaurants, either temporarily or permanently.
Welbilt swung to a net loss of $7.4 million last year, having reported net income of $55.9 million the previous year.
Ali Group said it is prudently positive for the coming years, having achieved organic growth of 4% before the pandemic.
Created in 1963 when founder Luciano Berti started a dishwasher business near Milan, Ali Group has grown steadily through acquisitions and had turnover of 2 billion euros ($2.36 billion) in 2019, the company says.
Among big-name clients, Ali supplies Starbucks (NASDAQ:) and luxury hotel chains such as the Four Seasons as well as hospitals, airports, cafes and ice cream parlours.
In a research note on the deal, Barclays analyst Seiden said that Ali Group, despite a net cash position of 573 million euros ($680.32 million) last August, would need to leverage up in a way it hasn’t in the company’s recent past.
Ali Group has said it has secured deal financing from Goldman Sachs (NYSE:) and Italy’s Mediobanca (OTC:).
As part of its winning bid, the group will also pay the $110 million break-up fee Welbilt owes Middleby for dumping their previous deal.
($1 = 0.8466 euros)