Manitowoc Co., the maker of cranes and commercial-food appliances, said it held several discussions with Relational Investors LLC and will consider the activist fund’s proposal to break up the company.
Goldman Sachs Group Inc. (NYSE: GS) is advising Manitowoc, the Wisconsin-based company said Friday in a statement. Relational has amassed an 8.5 percent stake in Manitowoc, according to a filing Thursday. The shares rose as much as 10 percent, the most since January.
San Diego-based Relational, 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. The fund sees the separation enhancing capital allocation and strategic flexibility, and attracting more focused shareholders. Relational may seek board representation next year.
“The stand-alone crane business would be significantly more cyclical and not have the smoother cash flows of the foodservice business,” Charles Brady, a Boston-based analyst at BMO Capital Markets, said in a report Friday.
The food-service unit, which accounted for 38 percent of revenue, has an implied enterprise value of $3.9 billion based on the valuation of industry peers, Karen Ubelhart, an analyst at Bloomberg Industries, said in a report today.
Manitowoc (NYSE: MTW) climbed 10.8 percent Friday, to clsoe at $32.93.
Founded in 1902, Manitowoc sold $4 billion in crane equipment and commercial food coolers and heaters in 24 countries last year. Chairman and Chief Executive Officer Glen E. Tellock already has announced efforts to cut $80 million in costs to improve margins.
“Manitowoc will likely focus on improving its operational efficiencies in cranes and food service while it assesses the longer-term merits of any potential spin,” Larry De Maria, a New York-based analyst for William Blair & Co., said by email Friday. “It appears that the activist investors are dug in, and this process could take some time.”
Relationa 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, Thursday’s filing shows. The fund also is seeking measures to boost profit margins.
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.
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. (NYSE: HES), agricultural commodity processor Bunge Ltd. (NYSE: BG), snacks supplier Mondelez International Inc. (Nasdaq: NDLZ) and X-ray maker Hologic Inc. (Nasdaq: HOLX) among others, according to its most recent holdings disclosures.
Whitworth has served as chairman of Hewlett-Packard Co. (NYSE: HPQ) since April 2013, after urging changes to turn around the largest personal-computer maker.