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Low-hanging targets

6 January 2015 By Kevin Allison

Clunky conglomerates have been put on high alert. Billionaire investor Carl Icahn descended on Wisconsin-based Manitowoc just before the new year, urging it to separate construction cranes from its ice machines. Companies with such head-scratching pairings make easy targets for freshly invigorated uppity investors. The likes of Pitney Bowes, The Andersons and JBT may want to keep vigilant guard in 2015.

Manitowoc, with a market value of about $3 billion, would join a growing club of streamliners. Anixter, a manufacturer of fire alarms, electrical cable and screws – partly owned by real estate billionaire Sam Zell – recently put its fasteners business up for sale after failing to find a buyer for the whole company, according to the Financial Times. And TriMas is spinning off truck and trailer accessories from its hodgepodge of businesses.

Anti-diversification makes an easy focus for activists. A few years ago, for example, Bill Ackman successfully pushed Fortune Brands to unbundle Titleist golf balls and Moen faucets from Jim Beam whiskey. And Ralph Whitworth’s Relational Investors, alongside California teachers’ pension plan Calstrs, did the same with Timken’s ball bearings and steel.

The mismatched operations at Manitowoc seem to fit a similar bill. It generates most of its revenue from heavy-lifting equipment, but in 2008 it bulked up on blast chillers, pizza prep tables and other kitchen machinery operations. A disappointing performance at both divisions has left Manitowoc vulnerable to the argument – from Icahn, and Whitworth before him in June – that the two units would be better off apart.

Uppity investors are starting 2015 with a record of nearly $130 billion under management, according to Preqin, and are on an aggressive hunt for ways to deploy the funds.

The airport services and food processing equipment at JBT easily could pop up on a preliminary screen. The same goes for the postage machines and enterprise software at Pitney Bowes or the railcar repair business and ethanol operations of The Andersons. If nothing else, the developments at Manitowoc give others good reason to make the case for their mixed bags before someone else reassesses for them.


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