When Middleby Corporation agreed a deal to acquire Welbilt at the end of April, one of my first thoughts was how the news had been received in the boardroom of Ali Group’s HQ – and, more intriguingly, what sort of response it might provoke.
Now we know the answer to that after the Milan-based catering equipment goliath tabled a higher cash offer for the business with Welbilt’s board of directors last week.
Middleby’s intention to buy Welbilt was made public on 21 April. Ali Group submitted its proposal to Welbilt’s board on 25 May.
Clearly, it was a busy 34 days for the Italian firm as it scrambled to get the financing in place to spoil its arch rival’s party.
Ali Group claims its proposal stands a far greater chance of success. Its bid is significantly higher (a 47% premium on the share price prior to the day’s trading when Middleby’s offer was agreed) and it argues that the transaction has fewer question marks relating to antitrust provisions, even though senior Middleby executives have endeavoured to play down such concerns from day one.
Whoever gets their hands on the prize will be well on the way to becoming the undisputed champion of the catering equipment world.
Prior to Covid, Middleby made $2 billion from foodservice equipment sales, while I understand Ali Group’s global turnover was somewhere around the $2.4 billion mark.
With Welbilt posting $1.6 billion in pre-pandemic revenues, Hoshizaki’s status as the industry number one ($2.5 billion pre-pandemic) is under imminent threat.
I suspect Ali Group’s motivation for buying Welbilt is more about preventing two of its closest competitors joining forces as it is about satisfying a deep-rooted or long-held desire to gain ownership of Welbilt’s portfolio of brands.
Ali Group has built its success on strategic acquisitions, but it feels unlikely that it would have made such an industry-defining move had Middleby not played its card first.
What is certain is that whoever succeeds in getting the deal across the line then faces the prospect of having to undertake the largest integration exercise that the industry has ever seen.
So what next? Middleby argues that the terms of its offer provide superior value to Welbilt shareholders, while Welbilt is said to face a $110m break-up fee if it abandons the tie-up at this stage.
But cash talks and Ali Group certainly can’t be accused of failing to put its money where its mouth is.
Irrespective of any tough decisions they have to make, Welbilt shareholders must be feeling very good about things right now.
Welbilt staff, on the other hand, find themselves in the curious position of wondering just who their future employer will end up being.
Will they become the golden wheel in the highly ambitious, assertive and publicly-listed Middleby machine, or a shining light in the famously autonomous, pragmatic and family-owned Ali empire?
Both parties insist they offer the best cultural fit. Only one will win out.