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Middleby's M-TEK Buyout to Boost Food Processing Business

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The Middleby Corporation (MIDD - Free Report) announced on Oct 1 that it has acquired Elgin, Il-based M-TEK Corporation. Financial terms of the transaction have not been disclosed. The company’s share price has gained roughly 0.1%, ending the trading session at $125.65.

M-TEK is primarily engaged in manufacturing equipment used in Modified Atmosphere Packaging (MAP) systems. The MAP systems, used for sucking oxygen out of a package, are extensively used in the food industry. M-TEK generates approximately $10 million revenues annually.

Details of Buyout

Per the deal, Middleby will integrate M-TEK with its Food Processing Equipment Group. This buyout will expand the company’s product offerings in the industrial food processing end market. Moreover, M-TEK will help the company to penetrate in new markets and expand geographical reach.

It is worth mentioning here that Middleby’s Food Processing Equipment Group primarily engages in manufacturing equipment — including batch ovens, processing ovens, defrosting and packaging equipment, and others — for the food processing industry. Leading equipment brands under the Food Processing Equipment Group are Auto-Bake, Alkar, Cozzini, RapidPak and many more. This segment accounted for roughly 14% of the company’s total revenues in second-quarter 2018.

Snapshot of Middleby’s Inorganic Initiatives

We believe that the above-mentioned transaction is consistent with Middleby’s policy of acquiring businesses to gain access to new customers, regions and product lines.

Prior to this buyout, Middleby successfully completed $1-billion buyout of Taylor Company from UTC Climate, Controls & Security — the business division of United Technologies Corporation — in June. The acquisition will fortify Middleby’s position in the global commercial foodservice industry. In April, Middleby acquired Firex Srl, JoeTap and Josper S.A. While Firex Srl and JoeTap have been strengthening the company’s commercial foodservice business, Josper S.A. buyout is adding value to residential and commercial foodservice businesses.

In the second quarter of 2018, Middleby’s acquired assets generated revenues of approximately $84.1 million.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $7 billion, Middleby currently carries a Zacks Rank #3 (Hold). Focus on innovation of products, lower corporate taxes and synergistic gains from acquired assets will be advantageous for the company in the quarters ahead. However, soft AGA business, high restructuring expenses and weak volume for the Food Processing Equipment segment might continue to harm its performance.

The company’s Zacks Consensus Estimate is pegged at $6.13 per share for 2018 and $6.90 per share for 2019, reflecting growth of 2.7% and 4.7% from the respective 60-day-ago tallies.

The Middleby Corporation Price and Consensus
 

The Middleby Corporation Price and Consensus | The Middleby Corporation Quote

In the last three months, shares of Middleby yielded 20.6% return, outperforming 11.4% growth recorded by the industry.





Two better-ranked stocks in the industry are Colfax Corporation , and DXP Enterprises, Inc. (DXPE - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for both of these stocks have improved for the current year and next. The average positive earnings surprise for the last four quarters was 7.91% for Colfax and 101.32% for DXP Enterprises.

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