Manitowoc Is Targeted by Relational to Spin Off Food Business

Manitowoc Co., the maker of cranes and commercial-food appliances such as refrigerators, has been targeted by activist shareholder Relational Investors LLC.

Relational has amassed 8.5 percent of Wisconsin-based Manitowoc and has met with management, according to a regulatory filing yesterday. The activist fund co-founded by Ralph Whitworth and David Batchelder wants the company to spin off its food-service business, responsible for ice makers and freezers, from its industrial business, which makes and services cranes and boom trucks.

Relational, based in San Diego, first disclosed a small holding of Manitowoc in February 2013. While the fund held talks with management in January, the Manitowoc board hasn’t yet agreed to meet, yesterday’s filing shows. The fund also is seeking measures to boost profit margins.

Separating the cyclical crane business from the food-service group will enhance capital allocation and strategic flexibility, and attract more focused shareholders, according to the filing. Relational may seek board representation next year.

“These two businesses differ materially in their operating metrics and cyclical characteristics, which we’re convinced causes a perpetual discount in the share price,” Relational said in the filing. The fund intends to be “persistent and tenacious” in its efforts to persuade the company to increase shareholder value.

A representative for Manitowoc didn’t respond to a call seeking comment. Manitowoc jumped as much as 13 percent in late trading yesterday after the report. The company’s shares gained 27 percent this year through the close of regular trading, giving it a market value of $4 billion. That would make Relational’s stake worth about $340 million.

Lowering Costs

Founded in 1902, Manitowoc sold $4 billion in crane equipment and commercial food coolers and heaters in 24 countries last year. Chief Executive Officer Glen E. Tellock, who is also chairman, already has announced efforts to cut $80 million in costs to improve margins.

Food-service sales climbed 9.3 percent in the first quarter from a year ago, while crane revenue fell 14 percent amid customer project delays, Manitowoc reported May 1. Tellock reiterated at the time forecasts for this year including “modest” crane revenue growth, mid-single digit food-service sales gains and about $90 million in capital spending.

Relational manages about $6 billion and regularly presses for changes in public companies such as separating diverse businesses and finding ways to operate more efficiently.

Timken, B/E

Founded in 1996, Relational buys stakes in companies it considers undervalued and then lobbies management and boards for changes to boost returns. The firm has successfully agitated for similar business splits at targeted companies including bearings maker Timken Co., B/E Aerospace Inc., ITT Corp., Ingersoll-Rand Plc and Agilent Technologies Inc.

Relational also has recently targeted other industrial companies including tool and equipment manufacturer SPX Corp., machinery builder Illinois Tool Works Inc. and hazardous waste disposer Clean Harbors Inc.

Activist investors tend to buy at least 5 percent of a company’s stock and flag their intention to actively engage executives and directors by disclosing their holding in a 13D filing with the U.S. Securities and Exchange Commission.

Relational also holds stakes in energy group Hess Corp., agricultural commodity processor Bunge Ltd., snacks supplier Mondelez International Inc. and x-ray maker Hologic Inc. among others, according to its most recent holdings disclosures.

Whitworth has served as chairman of Hewlett-Packard Co. since April 2013, after urging changes to turn around the largest personal-computer maker.

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