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Pentair (PNR) Inks Deal to Acquire Manitowoc Ice for $1.6B

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Pentair plc (PNR - Free Report) entered into an agreement to acquire a leading provider of commercial ice makers, Manitowoc Ice, for $1.6 billion. Considering expected tax benefits of $220 million, the deal value is pegged at around $1.38 billion. Transaction is expected to close in second-quarter 2022. The buyout will expand the company’s commercial water solutions platform and enhance growth in the foodservice industry.

The acquisition is likely to be accretive to current-year earnings with an expected strong revenue synergy through a complete commercial water solutions portfolio.

Manitowoc Ice is a subsidiary of Welbilt, Inc. (WBT - Free Report) , which is a foremost manufacturer, designer and distributor of commercial ice machines in the United States and across the globe. Manitowoc Ice is expert in delivering food safety, differentiated product innovation and sustainability in icemaking with a global installed base capacity of approximately 1 million units and more than 200 commercial ice machines globally. The company deals with approximately 80% of the top-10 global restaurant chains and around 75% of the top-50 global Quick-Serve Restaurants. Many of these restaurants also depend on Pentair for water quality solutions and services.

In 2021, Manitowoc Ice generated revenues of $308 million with EBITDA margins of around 30%. It has a track record of continued top-line growth coupled with strong free cash flow. The acquisition builds on Pentair’s acquisition of Ken’s Beverages in 2021, which provides the company a valuable national direct service network to expand its commercial water treatment business.

The latest buyout will expand Pentair’s growth in Water Quality direct-to-customer solutions and services. The company will be able to enhance water management capabilities and offer seamless foodservice experience to customers. Manitowoc Ice will aid Pentair to offer a complete commercial water solutions portfolio with extended range of products for cooking, cooling, drinking and cleaning. The buyout will boost the strength of Pentair Everpure to provide high-quality water for ice-based products.

Pentair aims to utilize its strong free cash flow to lower debt upon closing the deal. Manitowoc Ice will become part of the company’s Water Solutions platform under the Consumer Solutions segment.

Not including Manitowoc Ice, Pentair restates its current year and first-quarter 2022 financial guidance, which the company provided on fourth-quarter’s earnings call. It continues to expect adjusted earnings per share (EPS) guidance between $3.70 and $3.80 for the current year. The mid-point of the range indicates year-over-year growth of 10%. For the first quarter of 2022, the company expects adjusted EPS of around 80 cents. Current-quarter sales is expected to be up 7-11% on a reported basis from the prior-year period’s levels. Sales growth for 2022 is projected to be increase 6-9% on a reported basis from 2021 levels. The company expects free cash flow to be equal to 100% of net income in 2022.

Pentair is focused on expanding in pool and residential and commercial water treatment through acquisitions. In December 2020, the company acquired Rocean to expand its core water treatment solutions in the residential and commercial water business. In September 2021, it completed the Pleatco acquisition, which added strong aftermarket filtration products to its flagship Pool and Industrial Filtration businesses.

Price Performance

Pentair’s stock has appreciated 2.9% in the past year against the industry’s decline of 10.8%.

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Zacks Rank and Stocks to Consider

Pentair currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Dover Corporation (DOV - Free Report) and Silgan Holdings Inc. (SLGN - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover’s fourth-quarter 2021 adjusted EPS increased 15% year over year to $1.78, beating the Zacks Consensus Estimate of $1.66. DOV has a trailing four-quarter earnings surprise of 12.3%, on average.

Dover has an estimated earnings growth rate of around 12.7% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 5%. DOV’s shares have rallied around 32.1% in a year.

Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.

Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. In a year, SLGN has appreciated 11.7%.


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