Manitowoc tests waters for rival

By Rick Barrett, Milwaukee Journal Sentinel

Manitowoc Co., one of the world's biggest suppliers of cranes and ice machines, has returned with a $1.89 billion tentative offer for U.K.-based competitor Enodis PLC, almost two years after dropping an earlier bid for the company.

Manitowoc indicated it may offer 260 pence ($5.12) a share in cash for Enodis, a food-service equipment company that does roughly half of its manufacturing in the United States and has strong North American sales.

The acquisition would be a boost for Manitowoc's food-service division, which accounts for 11% of the company's sales, at a time when fast-food chains are expanding beyond burgers and fries to attract more health-conscious customers. Enodis' annual profits climbed 4.9% on improved prices and demand for products such as customized worktops that allow McDonald's to assemble made-to-order deli sandwiches in under a minute.

Enodis will "update the market in due course as appropriate," it said in a statement today. The announcement was made "with the consent of Manitowoc, however there is no certainty that a formal offer will be made," Enodis said.

Manitowoc officials declined to comment on the possibility of acquiring Enodis.

The company, which has been granted access to Enodis' financial records, scrapped a previous $1.5 billion takeover bid in 2006 amid regulatory concerns about product overlap in areas including ice machines. The failed bid was one of three Enodis attracted that year.

"To everyone's amazement, Enodis entered 2007 still independent," the Daily Mail newspaper in London wrote last October.

The British company is worth more now than it was two years ago, according to analysts. Acquiring Enodis would give Manitowoc a stronger presence in Europe as well as eliminate a competitor.

"Quite frankly, Manitowoc wasn't going to be able to penetrate the European market in any meaningful way by doing it themselves. So they have to get into it through an acquisition," said analyst Charles Brady with BMO Capital Markets.

The offer of 260 pence a share would be 72% higher than Enodis' share price Wednesday. That and other concerns could make the deal a little hard for some Manitowoc shareholders to swallow.

"Manitowoc walked away last time, so who knows? But on the positive side, it showed they weren't willing to overpay for Enodis in 2006," Brady said.

The crane group accounts for more than 75% of Manitowoc's sales. But the food-equipment division and a division that builds ships are still integral parts of the company's growth strategy even if they are eclipsed in size by cranes.

"They have always viewed the crane business as cyclical. Food service has been seen as a counterweight to that business," said analyst Kent Mortensen with Thrivent Financial Management in Appleton.

Cranes, not ice machines

Long term, acquiring Enodis might give Manitowoc more financial stability. A downturn in the global crane industry could dramatically increase the importance of either the food service division or shipbuilding. Yet, investors currently are more interested in cranes than ice machines, according to analysts.

"If investors want to diversify out of heavy cranes, they can do that on their own," Brady said. "And it's not as if the crane business is about to peak out and get soft any time soon. If Manitowoc doesn't do this deal, they still have a very strong crane business for a number of years. So I don't think they feel as if they have a gun to their head to acquire Enodis."

Shareholders didn't embrace the 2006 takeover attempt, according to Mortensen.

"The shares definitely got hurt by it," he said. "It might be one of those decisions that makes sense long term
but in the short term is painful."
Manitowoc probably didn't want to announce its renewed interest in Enodis this early, analysts said, but U.K. regulations required it.

Could take months

Should the deal go forward, it could take months to complete.

But increasing the size of its international business, and its food-service business are two of Manitowoc's goals, said George Reis of George V. Reis Investment Group, in Two Rivers.

"They want to continue their aggressiveness. Absolutely (acquiring Enodis) could help Manitowoc diversify," Reis said.

After the announcement, Manitowoc shares closed at $42.26, down 4.5%. Enodis advanced 5.9% in the last 75 minutes of trading on the London Stock Exchange to close up 7.1% at 152 pence ($2.98).

Bloomberg News contributed to this report.

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