Illinois Tool Works Inc (ITW) has apparently won the race to acquire Enodis PLC (ENODF.PK), a maker of food service equipment located in Britain. On Thursday May 8, Enodis PLC agreed to be acquired by Illinois Tool Works, rejecting the previous offer by Manitowoc (MTW). Manitowac had been pursuing Enodis for two years, but in the end, Enodis accepted the Illinois Tool Works total offer of $2.3B. The Illinois Tool Works offer includes $2.1B in cash and the assumption of $210M in debt. By accepting this offer, it rejected Manitowac’s $1.9B bid.
Enodis manufactures food service equipment (food preparation, ice and beverage dispensing and refrigeration equipment) largely for fast food restaurants, institutional and grocery stores. Its fast food customers include major names such as McDonald’s and Burger King. Illinois Tool Works food service products include dishwashing, cooking, refrigeration, and food-processing equipment sold mostly to casual dining restaurants and institutional customers. Enodis’ fast food customers will nicely complement Illinois Tool Works’ casual dining customers.
Some analysts believe that Manitowac may respond to the Illinois Tool Works offer with an improved bid to buy Enodis. The market, however, seems to disagree: Shares of Manitowac are up almost 10% since the May 8 market close. The big share price increase signals that investors believed that Manitowac’s original offer to buy Enodis was a financial stretch, and to compete with the llinois Tool Works offer would be foolish. In addition, analysts believe that the acquisition would not have passed regulatory scrutiny without Manitowac disposing of several valuable assets. Since the stock price is up, the market believes that a detrimental counteroffer is unlikely to occur. To the market, Manitowac, free of a costly Enodis acquisition, is a more valuable company.
Illinois Tool Works expects the transaction to close in late summer of 2008. S&P quickly responded to the proposed acquisition of Enodis. On Thursday, it placed Illinois Tool Works on CreditWatch, possibly lowering the rating on its senior unsecured debt one level from “AA” to “A”.
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