Glenview Capital Management, founded in 2000 by Larry Robbins (Trades, Portfolio), is a privately held investment management firm. Glenview manages approximately $7.4B of assets split between two products: the Glenview Funds (long/short) and the Glenview Opportunity Funds (concentrated, opportunistic). Since inception, the compounded annualized rates of return for the Glenview and GO Funds are approximately 15% and 25%, respectively. Glenview is focused on delivering attractive absolute returns through an intense focus on deep fundamental research and individual security selection. Their investments are primarily focused on the US, with a smaller amount of exposure in Western Europe.
Last quarter, Glenview Capital initiated a position in Manitowoc (MTW, Financial) by buying 8,614,197 shares of the company. The Manitowoc Company, Inc. is a multi-industry, capital goods manufacturer operating in two principal markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice). The company's Crane segment is recognized as one of the world’s leading providers of engineered lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes and boom trucks. It accounts for ~62% of the company's top line. Manitowoc's Foodservice segment is one of the world’s leading innovators and manufacturers of commercial food-service equipment serving the ice, beverage, refrigeration, food-preparation, holding and cooking needs of restaurants, convenience stores, hotels, healthcare and institutional applications. It accounts for ~38% of the company's revenues.
Manitowoc recently reported weak 1Q FY2015 results, with issues like reduced CapEx spending by large restaurant chains and underperformance of KitchenCare business hurting the company's Foodservice equipment business. Management also lowered its guidance for Foodservice equipment business. The company is now expecting flat year-over-year revenues versus earlier expecations of mid single-digit revenue growth. However, I believe investors should look beyond the current weakness and buy the company's shares as Manitowoc remains on track to separate its Cranes and Foodservice businesses which will act as a catalyst for the stock.
In a recent report, Credit Suisse analysts maintained their outperform rating on the stock. Commenting on the results they said,
" Results were also hurt by a few customers with company specific issues and tougher comps versus last year tied to new product rollouts. On the positive, Cranes surprised on the upside.
MTW noted pockets of improvement across towers and crawlers offset by weakness in boom trucks and rough terrain cranes. While MTW is seeing headwinds from energy, US non-res is helping to offset along with the Middle East. Also, the delivery of the VPC crane is slightly ahead of schedule."
In February, Manitowoc agreed to Carl Icahn (Trades, Portfolio)'s demand for separating its business into two different entities – one for its Cranes business and the other for its food service business. Both these units cater to different end markets and have different business drivers. While Manitowoc's Crane business caters to infrastructure, commercial construction and industrial end markets, its Food Service business caters to restaurant and commercial kitchens. For Crane business government spending on infrastructure, cyclical recovery in commercial construction and oil prices are the key drivers. On the other hand, consumer confidence and how the restaurant industry is performing is important for food services business.
There is little synergy between these two businesses, so the planned separation is clearly a logical step in Manitowoc's evolution. This separation will generate value for shareholders by creating two strong industry-leading companies with distinct enterprise strategy. The two companies will be able to attract long-term shareholders that are appropriate for their business profile. Also, each business will be able to optimize its capital structure and capital allocation.
Manitowoc is currently trading at a 14 times forward PE. I believe the stock is a good buy at current levels given its reasonable valuations and upcoming catalyst in the form of spinoff of foodservice business.
