Industrial goods manufacturer Middleby Corporation (MIDD) recently entered into an agreement with U-Line Corporation for acquiring the latter’s innovative and productive business lines. The acquisition will act as a growth driver for Middleby in its residential platform and stimulate profitability in the long run.
Transaction Rationale
The latest acquisition is expected to substantially increase Middleby’s productive resource base. U-Line is a commercial leader, offering services in the refrigerating, wine-preserving and residential fixed modular ice-making market since 1962. The company has created a niche market for its high-quality innovation-oriented services. Also, by offering non-imitable highly differentiated products, the company has maintained a monopolizing status in the American market for decades. Thus, by obtaining U-Line’s business, Middleby can effortlessly tackle threats of market rivalry.
Middleby possesses adequate financial strength to fuel its inorganic growth. The cash balance of the company was $ 32,258 million and gross profit margin was 39.1%, at the end of last reported quarter. We believe the new acquisition would revise Middleby’s current double-digit profitability upwards in the upcoming quarters.
Moving Forward
Middleby has been conducting business in the cooking equipment industry since 1988. It designs, produces and markets diversified equipments used for food servicing and processing as well as residential cooking. The company enjoys a high brand value in the market. Further, Middleby has substantially expanded the scale of its operations over the years by acquiring firms such as Viking Range Corporation, Concordia Coffee Company Inc. and Process Equipment Solutions.
Given the estimated expansion plans, Middleby presently sports a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the industry include Barnes Group Inc. (B), Manitex International, Inc. (MNTX) and Nordson Corp. (NDSN), each carrying a Zacks Rank #2 (Buy).
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