Manitowoc Company, Inc. (MTW): Breaking Up Is Easy to Do

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All together Manitowoc Company, Inc. (NYSE:MTW) trades at about 20 times earnings. Terex Corporation (NYSE:TEX) is a competitor of Manitowoc Crane. Terex is a fellow maker of crane equipment, as well as maker of other heavy machinery. As a pure play heavy machinery company, Terex Corporation (NYSE:TEX) trades at about 30 times earnings. The same can be said about The Middleby Corporation (NASDAQ:MIDD), a competitor of Manitowoc Foodservice. Middleby is a foodservice equipment maker with a range of products and customers very much similar to Manitowoc Foodservice. As a pure play foodservice equipment company, The Middleby Corporation (NASDAQ:MIDD) trades at an earnings multiple of about 25.

There are of course no guarantees that a broken-up Manitowoc would trade at the exact same valuations as pure plays like Terex Corporation (NYSE:TEX) and The Middleby Corporation (NASDAQ:MIDD). While there no guarantees, it would certainly be much easier for the market to make that determination with two separate companies, rather than the one odd couple company Manitowoc is currently. If each of Manitowoc’s individual divisions did traded at similar multiples to the above mentioned competitors, Manitowoc could possibly trade at somewhere around $23 a share, about 33% higher than Friday’s closing price.

And this valuation assumes that neither of the two separate companies would be acquired at an even higher multiple. For example, The Middleby Corporation is large enough to acquire Manitowoc Foodservice. And more importantly than just being large enough, Middleby had previously attempted to acquire Enodis PLC in 2006, two years before Manitowoc acquired them. If Middleby is still interested in expanding via acquisition, it would not be surprising to one day see Middleby acquire Manitowoc Foodservice as a completely separate company.

Foolish Bottom Line
With just the stroke of a pen, Manitowoc Company, Inc. (NYSE:MTW)’s management could do a lot to unlock shareholder value. By simply spinning-off the smaller Manitowoc Foodservice division, this would allow current shareholders to benefit by enticing future shareholders to bid up the shares of the two new pure play companies. Given management’s willingness to sell off Manitowoc Marine in 2009 (Manitowoc’s original 111-year old business), I see little reason why management wouldn’t at least be amenable to the idea of doing something similar with the rest of the company. Breaking up is easy to do after all, and sometimes quite profitably as well.

The article Breaking Up Is Easy to Do originally appeared on and is written by Matthew Luke.

Matthew Luke owns shares of Manitowoc Company. The Motley Fool recommends McDonald’s and Middleby. The Motley Fool owns shares of McDonald’s and Middleby. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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