Manitowoc Divests Biz - Analyst Blog

Manitowoc Co. Inc. (MTW) has decided to divest its Kysor/Warren and Kysor/Warren de Mexico businesses to Lennox International Inc. (LII) for approximately $138 million, subject to a post-closing working capital adjustment. Kysor/Warren is a leading producer of refrigerated display merchandisers and systems primarily for retail applications.

The Kysor/Warren business was part of Manitowoc's Foodservice Equipment segment. Foodservice Equipment is a leading manufacturer of commercial foodservice equipment, serving the ice, beverage, refrigeration, food preparation and cooking needs of restaurants, convenience stores, hotels, healthcare, and institutional applications. Kysor/Warren is a leading producer of refrigerated display merchandisers and systems primarily for retail applications such as grocery stores, supermarkets, and convenience stores.

According to the company, the Kysor/Warren business was primarily focused on food retail, a different market category and was not in line with the company's focus on building the commercial food service equipment line. Manitowoc expects the divestiture to allow it to focus more on its core brands, improve operational efficiencies across its global footprint and drive organic growth opportunities.

The transaction is expected to close in the first quarter of 2011, pursuant to customary closing conditions, including regulatory approvals. Manitowoc will utilize $100 million of the proceeds toward debt reduction. This will help the company reduce its high debt-to-capitalization ratio. As of September 30, 2010, Manitowoc's debt-to-capitalization ratio marginally improved to 79.2% from 81.2% as of June 30, 2010. This is in line with management's focus on improving its balance sheet and its debt reduction goal of $200 million in fiscal 2010.

Manitowoc holds a strong market position in the cranes business. However, the segment has not seen a revenue increase since the third quarter of 2008. Even though we foresee significant growth potential in this market over the long term, driven by an increase in global energy consumption and the need for infrastructure upgrade in both the developed as well as developing nations, the short-term outlook remains challenging. We do not expect a significant turnaround in the segment's performance in fiscal 2010. We currently have a Zacks #5 Rank (short-term Strong Sell recommendation) on the stock.

Dallas-based Lennox International Inc is a manufacturer of equipment for the heating, air conditioning and refrigeration markets. Lennox's refrigeration business provides unit coolers, condensing units and other commercial equipment used in cold storage applications primarily to preserve perishables in supermarkets, convenience stores, restaurants, warehouses and distribution centers.

Manitowoc is a multi-industry, capital goods manufacturer with over 100 manufacturing and service facilities in 26 countries. It is one of the world's largest providers of lifting equipment for the global construction industry. It is also a leading manufacturer of commercial foodservice equipment serving the ice, beverage, refrigeration, food preparation and cooking needs of restaurants, convenience stores, hotels, healthcare and institutional applications. Manitowoc competes with Terex Corp. (TEX) and privately held Altec Industries Inc. and American Panel Corporation.

 
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