The Middleby Corporation

1400 Toastmaster Drive
Elgin, Illinois 60120
U.S.A.
Telephone: (847) 741-3300
Fax: (847) 741-0015
Web site: http://www.middleby.com

Public Company
Incorporated:
1985
Employees: 8,493
Sales: $2.34 billion (2017)
Stock Exchanges: Nasdaq Global Market
Ticker Symbol: MIDD
NAICS: 333415, Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing; 551112, Offices of Other Holding Companies; 335220, Major Household Appliance Manufacturing

The Middleby Corporation is a leading designer, manufacturer, and marketer of a wide range of commercial and institutional foodservice equipment. Its products include heavy-duty cooking equipment such as ranges, convection ovens, broilers, grills, and fryers used in restaurants and other institutional kitchens. The company also markets commercial toasters, refrigerators, dishwashers, mixers, griddles, and other cooking equipment used in fast-food, casual, and full-service restaurants. Middleby conducts business through the subsidiary Middleby Marshall Inc. During the late 2010s operations were organized into three main divisions. As of 2018, the Commercial Foodservice Equipment Group accounted for 59.2 percent of sales, followed by the Residential Kitchen Equipment Group (25.7 percent) and the Food Processing Equipment Group (15.1 percent).

INCORPORATED: 1985

The Middleby Corporation was incorporated in Delaware, Maryland, on May 14, 1985, as a successor to TMC Industries Ltd. From 1978 to 1985, TMC Industries was the parent company of WWG Industries, Inc., a Georgia-based carpet manufacturer. TMC Industries had acquired WWG Industries in 1978 for $100 million from Champion International Corporation. High interest rates and a collapsing housing market forced WWG Industries into Chapter 11 bankruptcy protection in the early 1980s. When it emerged from Chapter 11 protection in 1983, largely under the guidance of William F. Whitman Jr., a former PaineWebber executive, WWG Industries acquired the Middleby Marshall Oven Co., Inc., in a highly leveraged deal.

COMPANY PERSPECTIVES

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The 1983 sale of Middleby Marshall was engineered by William F. Whitman Jr. and David P. Riley, who managed the unit for Stewart Systems. Riley first saw the possibility of splitting off Middleby Marshall from Stewart in 1982 and contacted an investment banker about a possible leveraged buyout. A year later Whitman emerged as a partner after steering WWG out of bankruptcy. Following the acquisition of Middleby Marshall by WWG, Whitman held 51 percent of the new company and became chairman of the board, and Riley was named president and, later, chief executive officer.

The leading pizza chains, notably Domino's Pizza Inc. and Pizza Hut Inc., recognized the superiority of Middleby Marshall's conveyor ovens. The appliances' greater cooking speed and patented cooking methods enabled them to guarantee faster pizza deliveries. With WWG Industries as Middleby Marshall's parent company, Middleby Marshall benefited from WWG's net loss carry-forward tax benefits, which were valued at $50 million, and its status as a public company.

DIFFICULT FIRST YEARS

The first two years for Middleby were marked by flat sales and earnings, and the company reported a net loss of $1.1 million on net sales of $24.8 million in 1986. Cooking ovens were the company's core business, accounting for approximately 75 percent of net sales. Its acquisition of Reynolds Electric Co. for $1.4 million in cash gave Middleby a presence in the commercial mixer business, but it was facing stiff competition from Hobart Corporation, which held an 80 percent share of the $100 million commercial mixer market. Middleby looked to its core business for future growth and enjoyed 40 percent margins on the sales of its cooking ovens.

In November 1986 Middleby divested itself of its revolving tray oven business, Culter Industries, Inc., for $200,000. The unit had been a significant drag on earnings, accounting for only 12 percent of sales while occupying some 35 percent of manufacturing space. Following the sale, earnings improved with the help of other cost-cutting measures, and in 1987 Middleby reported net income of $629,000 on net sales to $29.1 million, a 17 percent increase in net sales over the previous year.

RECORD FINANCIAL PERFORMANCE

Middleby posted record sales in 1988, up 18 percent over the previous year to $34.2 million, and net income of $4.2 million—a peak it was unable to match in subsequent years (through 1996). The company was able to improve its balance sheet and eliminate much of its debt, significantly reducing interest expense and improving the bottom line of its income statement. At the end of 1986, debt had accounted for 97 percent of Middleby's capital structure. In November 1987 the company was able to refinance and reduce debt to 61 percent, with 25 percent preferred stock and 14 percent shareholders' equity accounting for its remaining capitalization. Middleby's strong performance in 1988 then allowed it to prepay all of its revolving bank debt more than four years ahead of schedule, so that by yearend 1988, debt represented only 34 percent of the company's capitalization.

On July 13, 1988, the company's stock, which had been trading on Nasdaq over-the-counter markets, was listed on the American Stock Exchange (AMEX). In December the company began a cash dividend program, starting with a $0.02 quarterly dividend and a special year-end dividend of $0.03 per share. To improve the liquidity and marketability of the company's stock, a five-for-four common stock split was implemented on June 1, 1988. The dividends would be suspended in 1991, however.

At this time the company's principal product was the Pacesetter oven, which was sold to what was then called “fast food chain” markets, especially pizza makers. Middleby's strategy was to broaden the acceptance of Pacesetter ovens in other foodservice markets, while at the same time broadening its product base. Other products included conventional deck ovens (Middleby entered the market in 1988 with a product manufactured in South Korea), a proprietary oven ventilation system (introduced in 1987), and Titan brand commercial electric food mixers and related accessories.

KEY DATES
1888:
Middleby Marshall Oven Co., Inc., is established by Joseph Middleby.
1978:
TMC Industries Ltd. acquires WWG Industries, Inc.
1983:
WWG Industries buys Middleby Marshall.
1985:
The Middleby Corporation is incorporated as a successor to TMC Industries Ltd.
1989:
The company acquires the Foodservice Equipment Group of Hussmann Corporation.
1990:
Middleby purchases a majority interest in Asbury Associates Inc.
2001:
The G.S. Blodgett Corporation, a cooking equipment manufacturer, is purchased.
2009:
TurboChef Technologies Inc., a maker of high-speed cooking equipment, is purchased.
2013:
Middleby acquires Viking Range Corporation.
2018:
The company makes a $1 billion deal with UTC Climate Controls & Security to purchase the Taylor Company.

MAJOR ACQUISITION

Full of confidence in the future growth of the foodservice market and not anticipating the recession of the early 1990s, Middleby acquired the Foodservice Equipment Group of Hussmann Corporation, a subsidiary of Whitman Corporation, for $62.5 million on July 14, 1989. The acquisition included four established businesses with well-known industry brand names: Southbend (heavy-duty cooking equipment), Toastmaster (cooking and warming equipment), Victory (refrigeration), and Seco (holding and serving systems). An unaffiliated company, Toastmaster, Inc., owned the rights to the Toastmaster brand name for consumer products. Toastmaster products manufactured by Middleby were limited to commercial products for the foodservice industry.

To finance the acquisition, Middleby took on a significant amount of debt, again raising its annual interest expense. It entered into a $77.5 million credit agreement with a major lending institution. It reduced its debt somewhat by applying the proceeds from the sale of its Southern Equipment Company Division of St. Louis in February 1990 for $7.9 million in cash to a group of private investors that included managers of the company.

After the acquisition the new businesses reported a $10 million loss for the first half of 1989, three times the amount originally forecast. In 1990 Middleby brought a lawsuit against Whitman, parent of Hussmann, over the Foodservice Equipment Group acquisition. The suit was settled in Middleby's favor in October 1992, when the jury awarded the company $27 million. The award was later set aside by a judge on a technicality, but Middleby and Hussmann reached a $19.5 million cash settlement out of court in 1993.

In the suit Middleby claimed that Hussmann's overly optimistic financial projections led it to pay too much for the companies. The losses greatly affected Middleby's financial performance over the next several years. Even though 1989 sales more than doubled to $72.2 million from $34.2 million in 1988, net income dropped 86 percent to only $573,000. While the reduction of net income was due in part to the poor performance of the newly acquired subsidiaries, Middleby had also assumed massive debt in the acquisition and was saddled with $3.6 million in interest expense in 1989, more than three times its 1988 level of about $1 million.

Middleby's growing interest expense continued to batter the company's bottom line in 1990, a year in which the company also experienced flat sales volume in a highly competitive environment. Interest expense grew to $8.3 million in 1990. Despite drastic cost-cutting measures that reduced the workforce at continuing operations by 22 percent and slashed administrative and overhead costs by 25 percent, Middleby reported a net loss of $978,000 on record sales of $113 million for 1990.

INTERNATIONAL GROWTH

In 1991 international growth was offset by declining domestic sales. International business increased 33 percent over 1990, accounting for 21 percent of Middleby's total sales in 1991. The next year Asbury's sales doubled as it expanded sales in Latin America, the Middle East, and Europe. Middleby reported higher net sales in 1992 of $110 million, up from $103 million in 1991, and reduced its net loss for the year to $1.9 million from $7.5 million in 1991.

On August 21, 1992, Middleby completed the sale of its Seco division, which was one of the units acquired from Hussmann in 1989, to a newly formed company called Seco Products Corporation. Net proceeds of $11 million were used to reduce debt. Middleby retained a minority interest in the new company, which it later sold in 1995 for $1.4 million net of expenses.

During the first half of 1992, Middleby consolidated its foodservice equipment divisions, closing plants in Niles and Morton Grove, Illinois, and consolidating production at an Elgin, Illinois, facility to save nearly $2 million in annual overhead expenses. The previous year Middleby had consolidated the Middleby Marshall and Toastmaster divisions into a newly formed Cooking Systems Group. In 1991 Middleby had also closed its Montreal manufacturing operations and dissolved its U.K. distribution center.

MIDDLEBY COOKING SYSTEMS GROUP ESTABLISHED

In 1993 management was consolidated at the Elgin-based Middleby Cooking Systems Group, the company's largest operating unit. David P. Riley, parent company Middleby's president and CEO, also assumed presidency of the newly formed Middleby Cooking Systems Group. Middleby Marshall became part of Middleby Cooking Systems, with Middleby Marshall's General Manager John Hastings named corporate executive vice president, chief financial officer, and vice president of administration. Two other financial executives left the company as part of the consolidation.

As part of its strategy to introduce new products into a relatively flat foodservice equipment market, Middleby formed a joint venture in 1993 with Rational GmbH, a German manufacturer of high-tech oven equipment that combined steam and convection cooking capabilities. The joint venture, called Rational Cooking Systems International, Inc., and headquartered in Schaumburg, Illinois, targeted the expanding U.S. market for high-tech ovens. Middleby would distribute the German company's product under the trade name Rational Combi-Steamer. Middleby marketed both compact floor and countertop units that were capable of multiple cooking processes, including cooking, baking, roasting, steaming, poaching, blanching, boiling, basting, grilling, and pressure cooking.

RETURN TO PROFITABILITY

Middleby did not return to profitability until 1994, reporting net income of $3.0 million on net sales of $130.0 million. It noted in its annual report that results from operations confirmed the expansion of margins and operating income increased fivefold. (Middleby had reported net income of $3.4 million in 1993, but that was helped by a one-time $7.7 million income item related to the settlement of its 1990 lawsuit with Hussmann and Whitman.) The balance sheet was restructured with an influx of new capital, and a new incentive system was put into place to link managers' compensation directly to shareholder return.

Middleby also noted in its annual report that it had repositioned itself to participate “in the rapid expansion that was unfolding in the fast-food and hotel markets across the globe.” Through its export management company, Asbury Associates, Middleby enjoyed a differential by offering “concept to kitchen floor” packages globally. In 1994 international sales accounted for a quarter of total sales.

As part of a major expansion of the company's manufacturing capabilities in the Philippines, Middleby Philippines Corporation (MPC) was incorporated in 1995. Middleby owned 80 percent of MPC, with the remaining 20 percent in the hands of local management. MPC's predecessor, Fab-Asia, Inc., was formed in 1991, with Middleby owning a majority interest. Middleby increased its ownership to 80 percent in 1994, and the operating assets of Fab-Asia were transferred to MPC on January 1, 1996. In April 1996 it moved to a new facility. MPC primarily served the Asian operations of major foodservice chains and hotels.

PUBLIC STOCK OFFERING

On January 23, 1997, Middleby sold its Victory Refrigeration Company to an investor group led by local management at Victory for approximately $11.8 million. The company had acquired Victory as part of its Foodservice Equipment Group acquisition in 1990. When Middleby's previous years' earnings were restated to exclude Victory, international sales accounted for an even greater proportion of the company's earnings. For fiscal 1996 international sales accounted for approximately 37 percent of total sales, up from 36 percent of the previous year's restated sales.

Recognizing the need to improve its capital structure by reducing debt and increasing shareholder equity, Middleby announced a public offering of stock in September 1997 at a price of $10 per share. Management hoped to raise approximately $18.5 million, which would be used in part to reduce debt. The company's stock had been trading on the NASDAQ National Market since November 1995, when it switched from the American Stock Exchange to provide broader shareholder liquidity and increase exposure among investors. Following Middleby's 1997 public offering, at least one investment firm began covering the stock, giving it an “outperform-significantly” rating.

RETOOLING

The company's move to the Nasdaq failed to produce significant changes in its bottom line. Middleby found itself in a precarious situation during the latter half of the 1990s. A new management team was brought in, and the company was forced to retool under the helm of Selim A. Bassoul, who took over as CEO in 2000.

Bassoul reflected on the company's position during this period in a 2008 Smart Business Chicago article by Mike Cottrill. “We had very limited resources and capital, we were running out of cash, we were very reliant on three customers that generated more than 60 percent of the sales,” he said. Besides its poor financial outlook, Bassoul claimed, “We lacked innovation, and the products we were generating or creating were very me-too products. The competitors were stealing our best employees, and the turnover at Middleby was more than 33 percent. Roughly 30 percent of the orders were not shipped on time, so we had a case study of a lousy company.”

Bassoul immediately set out revamp Middleby's operations. He cut products that were not related to the company's core business: cooking and warming equipment. Middleby's research and development team focused on creating energy-efficient, or “green,” products that quickly cooked or warmed food in less time than competing products. New products launched over the next several years were designed to cut energy consumption by nearly 40 percent, providing customers with significant cost savings on utility bills.

OVERSEAS EXPANSION

During the first decade of the 21st century, Middleby also focused heavily on the fast-food and casual dining segment, international expansion, and growing its business through key acquisitions. In 2001 the company acquired G.S. Blodgett Corp., a cooking equipment manufacturer selling products to hamburger and chicken fast-food chains. Houno A/S, a Dutch manufacturer of steam ovens, was purchased in 2006. Five acquisitions were made in 2007, including Jade Products Company and New Star International Holdings Inc. The latter purchase added the Star, Holman, and Lang brands to Middleby's arsenal.

The company made two key European purchases in April 2008, including Frifri aro SA, a frying system supplier, and Giga Grandi Cucine S.r.l., a range, oven, and steam cooking equipment manufacturer. TurboChef Technologies Inc., a maker of high-speed cooking equipment, was purchased in January 2009.

Under the leadership of Bassoul, Middleby had transformed itself into a major player in the foodservice equipment industry. The company's market share had grown from 6 percent in 2000 to nearly 20 percent in 2008, and it ranked as the largest or second-largest manufacturer in every market it served. Sales had grown significantly, from $242 million in 2003 to nearly $652 million in 2008. Profits were climbing as well, reaching $52.6 million in 2007 and then rising to $63.9 million in 2008. The company claimed that one of every three cooking appliances used in a commercial kitchen in the United States was a Middleby-owned brand. With international sales accounting for nearly 20 percent of the company's overall revenues, Middleby appeared to have secured a substantial foothold abroad as well.

INCREASED ACQUISITIONS

Middleby became extremely acquisitive during the following decade. Although many transactions were smaller in size, several major deals were made, including some that expanded Middleby's international footprint. For example, in 2011 the company acquired Australian stone hearth oven maker Beech Ovens, Pty., Ltd., and purchased the U.K. bar and catering equipment company Lincat Group plc for $94.8 million. Armor Inox SA, a French thermal processing systems company, also was added that year.

Middleby ended 2012 with net sales of $1.04 billion, up 21.3 percent from $855.91 million the previous year. Net earnings reached $120.70 million, compared to $95.47 million in 2011. A significant deal unfolded in 2013 when Middleby acquired Viking Range Corporation for $380 million. The deal gave the company a leading presence in the residential market for kitchen appliances such as ovens and cooking ranges. Middleby revealed that it would introduce Viking to emerging markets and expand the brand through new product rollouts and other appliance-related acquisitions.

Growth continued through the middle of the decade, beginning with the purchase of Concordia Coffee Company Inc., a coffee machines manufacturer, in 2014. That year Middleby also bolstered its residential offerings by acquiring the U.S. refrigeration, modular ice making, and wine preservation appliances manufacturer U-Line Corporation. Residential outdoor equipment company Lynx Grills, Inc., was added in 2015.

In 2016 Middleby purchased virtually all the assets of Follett Corporation for $206.9 million, which provided the healthcare and foodservice markets with ice and water dispensing equipment, medical refrigeration products, and ice storage and transport products. This deal was followed by the $81.4 million acquisition of the Swedish ovens and baking equipment company Sveba Dahlen in 2017.

Two other noteworthy deals occurred in 2017 when Middleby purchased the Arkansas-based commercial kitchen design, engineering, project management, manufacturing, and equipment solutions firm QualServ Solutions LLC for $40.2 million. Toward the end of the year, the company added new mixers and slicers to its product lineup by acquiring the Globe Food Equipment Company of Ohio for $104.6 million. In 2017 net sales increased 3 percent over the previous year, reaching $2.34 billion. Net earnings reached $298.13 million, up from $284.22 million in 2016.

Middleby continued to grow in 2018, beginning the year by adding two Italian companies. These included a robotics, handling, and automation firm named Ve. Ma. C. and the steam cooking equipment maker Firex Srl. Additionally, the on-demand cold brew and nitro coffee dispensing equipment maker JoeTap was acquired during the middle of the year, along with the Spanish charcoal grill and oven cooking equipment maker Josper S.A. Middleby set the stage for one of the largest acquisitions in its history in mid-2018 when it agreed to a $1 billion deal with UTC Climate Controls & Security for Taylor Company. Taylor was a beverage solutions company with products such as frozen drink machines and ice cream dispensing equipment. Toward the end of the decade, Middleby appeared to be positioned for continued growth and success.

David Bianco
Updated, Christina M. Stansell; Paul R. Greenland

PRINCIPAL SUBSIDIARIES

Middleby has dozens of subsidiaries in North and America, Europe, Australia, and Asia. Some of its key subsidiaries include AGA Rangemaster Group PLC (UK); Beech Ovens Pty. Ltd. (Australia); Burford Corp.; Cozzini LLC; F.R. Drake Co.; Fired Earth Ltd. (UK); Follett LLC; G.S. Blodgett Corp.; Grange SAS (France); Holman Cooking Equipment Inc.; Jade Range LLC; L2F Inc.; Middleby Espana SLU (Spain); Middleby Europe SL (Spain); Middleby Holding UK Ltd. (UK); Middleby Marshall, Inc.; Middleby Worldwide Inc.; Nieco Corp.; Northland Corp.; Pitco Frialator Inc.; Star Manufacturing International Inc.; TurboChef Technologies Inc.; U-Line Corp.; Viking Range, LLC; Waterford Stanley Ltd. (Ireland); Wells Bloomfield LLC.

PRINCIPAL DIVISIONS

Commercial Foodservice Equipment Group; Food Processing Equipment Group; Residential Kitchen Equipment Group

PRINCIPAL COMPETITORS

AB Electrolux; Illinois Tool Works Inc.; Welbilt, Inc.

FURTHER READING

Alva, Marilyn. “Professional Cooking Equipment Maker Digests New Acquisitions.” Investor's Business Daily, October 15, 2008.

Brandstrader, J. R. “This Oven Maker Is Really Cooking.” Barron's, March 30, 2009.

Cottrill, Mike. “Changing the Menu.” Smart Business Chicago, September 2008.

“Elgin's Middleby Buys Slicer Company.” Daily Herald (Arlington Heights, IL), October 19, 2017.

“Middleby Acquires Italian Manufacturer.” Daily Herald (Arlington Heights, IL), March 28, 2018.

“Middleby Acquires JoeTap, Nitro Brew Coffee Systems.” Mergers &Acquisitions Week, May 2, 2018, 37.

“Middleby Acquisition of TurboChef Complete.” Foodservice Equipment & Supplies Specialist, February 1, 2009.

“Middleby Pays USD380m for Viking Range.” M & A Navigator, January 2, 2013.

“Middleby Signs Acquisition Agreement for Taylor Company for USD1.0bn.” M2 EquityBites, May 21, 2018.

“Middleby to Acquire U-Line.” Datamonitor Financial Deals Tracker, October 15, 2014.