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Last updated: October 20, 2007 2:11 am
Aga Foodservice has agreed to sell its commercial cooking equipment business to Ali of Italy for £260m in cash, about £140m of which will be returned to shareholders after debt and pension commitments.
The announcement signals the failure of Aga’s ambitious attempt to build a company selling cooking equipment to both consumers and caterers, spearheaded by its famous cast-iron ranges.
The disposal could clear the way for Edmund Truell, the pension scheme investor, to bid for the rump of Aga, whose £770m pension scheme is worth about £170m more than the business itself.
Mr Truell, the founder of Duke Street Capital and Pension Corporation Investments, has built a 17.1 per cent stake in Aga. The shares fell 2¾p to 426¾p.
William McGrath, chief executive, said Mr Truell was “an innovative person” but that Aga was in advanced discussions with institutions to transfer the risk of the pension scheme.
This could cut the value Mr Truell could extract from the pension scheme following a successful takeover bid. Mr McGrath said Aga and KPMG, its adviser, were studying the possibility of buying insurance to cover investment and mortality risks. The company is now unlikely to buy out the benefits of scheme members using annuities, which Mr McGrath said were poor value.
Aga badly damaged its credibility in the City last year with an abortive merger approach to its rival Enodis. The company, which was spun out of Midlands conglomerate Glynwed, had aimed to create a business supplying both domestic and commercial kitchens.
However, the dual strategy remained unpopular with analysts and its campaign of bolt-on acquisitions was marred by problems at Domain, a US home furnishing company sold at a loss earlier this year.
“Ali is one of the biggest foodservice companies in Europe and looks like it will be consolidator, which had been our idea when we approached Enodis,” Mr McGrath said. Ali is a private company with headquarters in Milan, whose activities include design, manufacturing, marketing and servicing of commercial foodservice equipment.
Aga expects to return capital to shareholders in the first quarter of next year. The disposal will leave it with a clutch of consumer businesses including the Aga ranges. Rangemaster, Rayburn and La Cornue are among its other cooker brands. In the year to December 31 2006, the group’s continuing operations achieved pro-forma earnings before interest, tax, depreciation and amortisation of £34.9m.
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