Welbilt, Inc. WBT announced yesterday that it has decided to acquire the entire shareholding in Solna, Sweden-based Avaj International Holding AB (also known as Crem International). On the same day, the company released its fourth-quarter 2017 results, details of which have been provided below.
Crem International specializes in the manufacturing of coffee machines meant for professional use. Its manufacturing facilities are located in Sweden, Spain and China. Prime brands including Expobar, Coffee Queen and Spengler are used in convenience stores, offices, cafes, restaurants, catering and offices. Private equity firms — Priveq Investment Fund IV L.P. and SEB Venture Capital — are the holders of majority shares in Crem.
In 2017, Crem generated approximately SEK 767 million or $90 million in revenues.
In the last three months, the company’s shares have declined 5.3%, underperforming 2.8% gain recorded by the industry.
Details of the Buyout
The transaction value is estimated at SEK 1,800 million or roughly $224 million. As noted, Welbilt will finance the acquisition value with cash-in-hand and funds raised from existing credit facilities.
The Crem buyout is anticipated to strengthen Welbilt’s business portfolio and create business opportunities in the commercial foodservice equipment market. Deeper penetration in European and Asian markets will also be possible. The company believes that this buyout will be accretive to its earnings in 2018 and forward. By 2020, run-rate synergies from this buyout are predicted to increase to $10 million.
Subject to fulfillment of customary closing conditions, Welbilt anticipates completing the acquisition in second-quarter 2018.
Snapshot of Fourth-Quarter 2017 Results
In fourth-quarter 2017, Welbilt’s adjusted earnings were 26 cents per share, surpassing the Zacks Consensus Estimate of 25 cents. Also, the bottom line surged 62.5% from the year-ago tally of 16 cents.
Net sales decreased 3.4% year over year to $365.9 million as 1.8% positive impact from favorable foreign currency movements was more than offset by 3.7% decline in organic sales and 1.5% adverse impact from divested assets. On a segmental basis, businesses were weak in all three segments, with sales decline of 2% in Americas, 6.7% fall in EMEA and 6.7% decline in APAC.
Cash and cash equivalent at the quarter-end was $128.4 million while, for the full year, cash generated from operating activities amounted $137.8 million and capital expenditures totaled $20.7 million.
For 2018, Welbilt anticipates net-sales growth to be within the 7-10% range, including organic growth of 1-4%, acquisition benefits of 5% and forex gains of 1%. Adjusted earnings per share are predicted to be 80-90 cents, surpassing 77 cents recorded in 2017.
Zacks Rank & Stocks to Consider
With a market capitalization of nearly $2.9 billion, Welbilt carries a Zacks Rank #3 (Hold).
Some stocks worth considering in the industry are Applied Industrial Technologies, Inc. AIT, Dover Corporation DOV and Roper Technologies, Inc. ROP, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has pulled off an average positive earnings surprise of 10.97% over the last four quarters. Also, earnings estimates for fiscal 2018 (ending June 2018) and fiscal 2019 (ending June 2019) have been revised upward over the last 60 days.
Dover Corporation has delivered an average beat of 7.26% in the trailing four quarters. Also, bottom-line expectations for 2018 and 2019 have improved over the past 60 days.
Roper Technologies’ financial performance has been impressive with an average positive surprise of 3.12% in the last four quarters. Also, earnings estimates for 2018 and 2019 have inched up over the last 60 days.
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