09.02.2015

Manitowoc cuts deal with Icahn

Manitowoc has reached an agreement with Carl Icahn, following his purchase of a 7.7 percent stake in the company and his proposal to split the business - see: Icahn picks on Manitowoc and also Manitowoc to split.

The agreement confirms that the separation of the Crane and Foodservice divisions will be done by spinning off the Foodservice business in a way that does not incur any tax liabilities. It also allows Icahn to appoint a director to the Manitowoc board and the board of the separated Foodservice company, in exchange he will vote in favour of the Manitowoc board nominees due for election at the 2015 Annual General Meeting.

Manitowoc has also agreed not to reduce the trigger level of its shareholder rights plan below 20 percent for the duration of a standstill agreement, and to a limited waiver for Icahn to the provisions of the ‘Wisconsin business combination’ statute, enabling him to acquire up to 14.99 percent of Manitowoc’s shares without facing the restrictions which normally apply when 10 percent is reached.

Finally the agreement confirms certain corporate governance commitments for the new Foodservice entity, when it is spun off, including: Incorporation in Delaware, annual elections for the board, no stockholder rights plan that triggers below 20 percent and if it is not ratified by stockholders within 135 days of adoption, automatically expires, and that all holders of 10 percent or more of the company’s shares will be permitted to call a special shareholders meeting.

Manitowoc chief executive Glenn Tellock said: “We believe the governance details announced today are in the best interests of the company, Manitowoc shareholders, and future investors in the standalone Foodservice entity. We also welcome the perspective of Mr. Icahn’s representatives to the board of directors and believe they will add value. We look forward to working with them constructively. We are highly focused on executing our strategic plan, delivering on our goals, and working towards the successful separation of our Cranes and Foodservice businesses, which is expected in the first quarter of 2016.”

Icahn added: “We applaud the ability of Manitowoc’s board of directors and management to recognise the importance of separating the companies as well as the importance of good corporate governance. In particular, I would like to thank Glen Tellock for standing behind his commitment to shareholders. We strongly believe that the separation of Manitowoc’s core businesses will create two stronger companies and that, in combination with improved corporate governance, shareholder value will be greatly enhanced by this agreement.”

Vertikal Comment

While this move could work out well, given the timing within the economic cycle, we think it a shame that the company has given in to such pressure from a speculative opportunist such as Icahn. However it may well be that the other 90 percent of Manitowoc’s shareholders feel the same way? Somehow we doubt that, but they do not appear to be mounting any great support or alternative plan for the status quo- so maybe they are happy either way? If so he is doing everyone a service.

The separation will create some decent business for overpaid advisers, lawyers and the like, and will almost certainly make Icahn a quick buck. However the costs and disruption could have negative implications for shareholders who invested in the company for the longer term, as well as employees and other stakeholders in the business.

Hopefully all will work out well……