Middleby on Acquisition Spree - Analyst Blog

Elgin, IL-based The Middleby Corporation (MIDD) has been experiencing splendid inorganic growth for about a year riding on its strategic acquisitions. In the last 12 months, Middleby has acquired Celfrost, Spooner Vicars, Viking and Nieco. Acquisitions contributed roughly $71.8 million in revenues or 27.9% of the revenue growth in the third quarter of 2013. The company expects contribution from acquisitions to increase in the quarters ahead.

Adding to the list, on Dec 19, 2013, the company acquired California-based Automatic Bar Controls, Inc. for an undisclosed amount. With average annual revenues of roughly $30.0 million, Automatic Bar Controls offers beverage dispensing systems and food sauce dispensing systems to cater to the foodservice industry. The products serve refrigerated and non-refrigerated toppings, pizza sauces, salad dressings, condiments, oils and heated cheese. Since the acquisition, Middleby's share price has increased 7.6% to $247.07 on Jan 8, 2014.

More recently, the company acquired the assets of Everett, MA-based Market Forge Industries Inc. For over 110 years, Market Forge has been providing steam cooking equipment to the foodservice industry.

With annual revenues of roughly $15 million, Market Forge deals in products including steamers, kettles, boilers, skillets, ovens and ranges. With the acquisition, Middleby is expected to boost its presence in the steam cooking industry. The company intends to make use of its strong distribution network to expand the sales for Market Forge.

However, a recent announcement by Darden Restaurants Inc. (DRI) to separate its underperforming Red Lobster business (either through spin-off or sale of the segment)has potential negatives on Middleby. With the divestiture, the customer base of Middleby is likely to reduce, thus impacting its revenues negatively.

Middleby currently has a Zacks Rank #1 (Strong Buy). Some other stocks in the industry worth a watch include Altra Industrial Motion Corp. (AIMC) and Flow International Corp. (FLOW). Both the stocks hold a Zacks Rank #2 (Buy).