Deal Overview
On February 25, 2025, The Middleby Corporation (NASDAQ: MIDD, $161.58, Market Capitalization: $8.7 billion), a global player in commercial food service, residential kitchen equipment, and food processing solutions, announced that as an update on its previously announced strategic review, the Board of Directors has unanimously approved to pursue a plan to separate Middleby’s Food Processing Business into a standalone, publicly traded company. The transaction, expected to be completed by early 2026, will be structured as a tax free distribution to Middleby shareholders under U.S. federal income tax laws. (for more information, visit spinoffresearch.com). Post separation, Middleby RemainCo will include the Commercial Food Service and Residential Kitchen Equipment businesses, while Middleby Food Processing (Spin-Off) includes the food processing business, which makes a range of heavy-duty equipment for flat breads. It will be a scalable best in class business focused exclusively on industrial food markets.
The completion of separation transaction will be contingent upon various conditions and approvals, including approval by Middleby’s board of directors, receipt of requisite regulatory clearances, and compliance with applicable U.S. Securities and Exchange Commission requirements. Goldman Sachs & Co. LLC is serving as the exclusive financial advisor to Middleby and Skadden, Arps, Slate, Meagher & Flom LLP is serving as its legal advisor. Timothy FitzGerald will continue as CEO of Middleby RemainCo while also serving on the board of the new Food Processing entity. Further, Middleby has strengthened its leadership team with key board appointments. Ed Garden, Founding Partner of Garden Investments and former Chief Investment Officer at Trian Partners has been appointed as an independent director. Mr. Garden’s appointment is in connection with a cooperation agreement the Company has made with Garden Investments, under which Garden Investments has agreed to support the full slate of directors at the Annual Meeting, among other provisions. Moreover, Julie Bowerman, a seasoned executive with over 25 years of experience in the food and beverage industry, has also joined the board. Currently serving as Chief Marketing Officer of Kellanova Company, she has held leadership roles at the Coca-Cola Company and Hain Celestial.
Deal Rationale
Since the last few years, Middleby stock has remained an underperformer largely due to rough macroeconomic factors such as COVID, the residential downturn, and higher interest rates. On 1/23, WSJ reported that Garden Investments, founded by Ed Garden, had accumulated a ~5% stake in Middleby, marking the firm’s first investment, leading to a ~17% share price pop on 1/24. According to the WSJ report, Garden Investments aimed to optimize the Company’s commercial food service segment, review other parts of the business, including the residential kitchen segment, refine capital allocation strategies, and seek board representation. Further, on 1/27, Middleby confirmed an ongoing strategic review of the business portfolio as part of the board of directors’ efforts to maximize shareholder value. According to the company, although successful, both businesses i.e Middlby RemainCo and Middleby Food Processing (Spin-Off) are inherently different, and will benefit from a renewed focus on individual core strategies, driving a full valuation in line with best-in-class peers for each entity.
The separation aims to create two distinct, market-leading companies, each with an optimized capital structure that aligns with its unique growth strategy and industry positioning. Moreover, it will result in enhanced operational efficiency, optimize capital allocation, and maximize growth opportunities for both Middleby RemainCo and the new Food Processing entity. By establishing two independent companies, Middleby aims to sharpen the strategic focus of each business, ensuring they are well-positioned to capitalize on emerging market trends. Middleby RemainCo will focus on strengthening its competitive edge in IoT-driven kitchen solutions, automation, and beverage innovations, while the Food Processing entity will expand its leadership in protein, bakery, and snack processing, aligning with long-term industry shifts toward automation and sustainability. Moreover, it will have the financial flexibility to pursue acquisitions in a highly fragmented market, reinforcing its position as a consolidator in the industry. Middleby has historically demonstrated a strong track record in M&A, having completed over 30 acquisitions since 2005, with acquired businesses experiencing an average revenue CAGR of 4%. As a standalone company, Middleby Food Processing Business will be able to fully leverage its acquisition currency and investor base, improving the strategic and financial impact of future transactions.
By creating two standalone companies, Middleby is also improving market transparency and investor understanding of each business’s performance and strategic direction. The separation will enable investors to better evaluate and assign appropriate valuation multiples to each entity, ensuring alignment with peer companies in their respective industries. Notably, the spin-off enables the food processing business to be valued in line with key food processing peers. Additionally, both businesses will benefit from stronger management accountability and governance, with dedicated leadership teams focused solely on executing their strategic priorities. The broader market environment favors this separation, with Middleby RemainCo aiming to capitalize on the increasing adoption of automation, ventless kitchens, and digitalized food service operations. The company’s recent expansion into the ice and beverage category has already proven to be a significant growth driver, generating $750 million in 2024 revenue at a 25% EBITDA margin.
Furthermore, Middleby RemainCo will focus on expanding its market leading presence in commercial and residential kitchen equipment through investments in IoT-enabled solutions, ventless cooking, and beverage and automation-related innovations. The residential kitchen segment, which is currently experiencing cyclical headwinds, is expected to recover on the back of new home construction and pick up in remodeling activity, leading to increased demand for high-end kitchen solutions. Meanwhile, the Food Processing entity will focus on labor-saving automation and sustainability initiatives, driven by the rising demand for efficient food production solutions. Key growth areas will include poultry processing, pet food manufacturing, and snack automation, sectors that are expected to see significant investment and technological advancements in the coming years. Financially, both entities are expected to maintain strong EBITDA margins and deliver substantial upside potential. Middleby RemainCo’s EBITDA margins, currently at approximately 23%, are projected to expand to 25% by 2028, driven by operational efficiencies and product innovation. The Food Processing Business, with EBITDA margins of 26% in 2024, is expected to exceed 27% by 2028 as it scales operations and integrates future acquisitions. The planned M&A pipeline for the Food Processing entity represents a significant opportunity to rapidly scale revenue and EBITDA, further reinforcing its market leadership position.
Middleby Corporation (NASDAQ: MIDD) operates through three primary segments: Commercial Foodservice, Residential Kitchen, and Food Processing. Each segment serves distinct markets with unique products, customers, and competitive dynamics. Over the past few years, Middleby has strategically expanded its product offerings, entered new markets, and made key acquisitions to strengthen its position across these segments. The company’s focus on innovation, automation, and digitalization has enabled it to maintain a competitive edge in a rapidly evolving industry. Middleby has positioned itself as a leader in various areas, such as ventless cooking, IoT-connected kitchen solutions, and sustainability driven product development. With a comprehensive portfolio spanning restaurants, luxury residential kitchens, and industrial food processing, the company has continued to expand its market share despite macroeconomic headwinds. Below is a detailed overview of each segment, its products, customer base, competition, and recent developments.
1. Commercial Foodservice Segment (62% of Total FY24 Reveues)
The Commercial Foodservice segment is Middleby’s largest revenue contributor, generating $2.4 billion in revenue in 2024, with an adjusted EBITDA margin of 27.4%. This segment provides a wide range of equipment, including cooking, warming, refrigeration, and beverage-dispensing solutions, to restaurants, hotels, and other food service establishments. Middleby has strengthened its position as an industry leader by focusing on automation, ventless kitchens, electrification, and IoT connectivity. The company offers advanced cooking solutions, such as the Turbochef Double Batch Oven, which leverages impinged air technology to reduce cooking times by up to 50%, allowing restaurant chains and independent operators to enhance efficiency. In the beverage space, the Newton Gravity beverage dispensing platform and the Wild Goose Filling system have been widely adopted by QSR and fast-casual restaurants, supporting the industry’s growing emphasis on beverage offerings. Middleby’s Open Kitchen IoT platform has further set it apart by connecting kitchen equipment to provide real-time analytics on performance, energy usage, and labor efficiency, helping operators optimize oil usage, reduce waste, and enhance profitability.
The company’s customer base includes leading QSR brands like McDonald’s, KFC, and Chipotle, which rely on Middleby’s innovations to streamline kitchen operations. The segment also serves hotels and resorts that demand high-volume food production solutions, as well as independent restaurants looking for advanced but scalable technology. Despite facing competition from Welbilt (now part of Ali Group) and Rational AG, Middleby differentiates itself with cutting-edge automation, end-to-end solutions, and continuous product innovation. Recent acquisitions, such as Wild Goose Filling, have strengthened Middleby’s presence in the beverage market, particularly in the craft beer and cold brew coffee segments. The company has also introduced products like the Newton Gravity beverage dispenser and the Pitco Torq fryer, which features continuous oil filtration for improved efficiency and product quality, maintaining its commitment to technological advancement.
2. Residential Kitchen Segment (19% of Total FY24 Reveues)
The Residential Kitchen segment serves high-end home kitchen customers with premium cooking and refrigeration solutions. In 2024, the segment generated $725 million in revenue, with an adjusted EBITDA margin of 10.2%. This segment has faced challenges due to macroeconomic conditions, including rising interest rates and softer consumer spending, but Middleby remains optimistic about long-term growth. The company’s product lineup includes high-performance cooking appliances from brands such as Viking, TurboChef, and AGA, catering to home chefs seeking professional-grade kitchen solutions. Middleby’s refrigeration solutions, including built-in refrigerators, wine coolers, and ice makers, are particularly popular among luxury home buyers. Additionally, the company has been investing in connected appliance technology, allowing homeowners to control their kitchen appliances remotely via smartphone apps, access recipe suggestions, and monitor energy usage. The primary customer base for this segment consists of high-income homeowners, luxury home builders, and interior designers who integrate Middleby’s appliances into high-end residential projects. The company faces strong competition from premium appliance brands such as Sub-Zero, Wolf, and Thermador, but differentiates itself with cutting-edge connected technology and a reputation for quality. In 2024, Middleby introduced the Marco milk pouch, an innovative product designed to enhance the functionality of its coffee machines, further showing its focus on user convenience. Despite short-term challenges in the housing market, the company expects to capitalize on the growing trend of home cooking and an increasing preference for high-end kitchen appliances as the housing sector stabilizes.
3. Food Processing Segment (Spin-Off) (19% of Total FY24 Revenues)
The Food Processing segment, which is set to be spun off into a standalone public company, provides industrial-scale solutions for food production, including baking, chilling, and slicing equipment. In 2024, the segment generated $731 million in revenue, with an adjusted EBITDA margin of 25.6%. The business has seen significant growth as food processors seek to enhance automation and efficiency while reducing labor costs. Middleby’s Food Processing segment offers solutions for industrial-scale food manufacturers, covering a wide array of production needs. Its baking equipment includes ovens, mixers, and proofers, which are widely used by major brands to produce bread, pastries, and other baked goods at scale. The company’s protein-processing solutions, such as slicers, grinders, and marinating systems, provide high-efficiency alternatives for meat and poultry processing. One of Middleby’s standout innovations in this space is the Alkar Turbochef oven, which combines microwave, convection, and steam technology to improve cooking yields and minimize waste. The company has also led advancements in food processing automation through solutions like the Micron-Pro oil management system, which optimizes oil usage and enhances product quality. The Food Processing segment serves a diverse set of customers, including large-scale food manufacturers and pet food producers, which rely on Middleby’s technology for high volume, high-precision production. The segment competes with major industrial food equipment manufacturers such as GEA Group, Bühler, and Marel but differentiates itself through its automation capabilities and focus on sustainability. In April 2024, Middleby acquired JBT Morrell, a leading provider of poultry processing equipment, expanding its footprint in the protein market. Additionally, the company launched the Thurne One Bacon slicer, designed to enhance yield and throughput in bacon production. These strategic investments and product launches reinforce Middleby’s commitment to driving innovation and efficiency in the industrial food processing sector, positioning the spin-off entity for long-term success.
4Q24 Performance
Middleby reported revenue of $1,014 million for 4Q24, marking a slight increase of 0.5% YoY from $1,009 million in 4Q23. This growth was driven by strong performance in the Food Processing segment, which saw a 14.1% YoY increase in revenue to $219.4 million, offsetting declines in the Commercial Food Service and Residential Kitchen segments. The operating income for the quarter rose significantly to $169.9 million, up 48.2% YoY from $114.6 million in 4Q23, reflecting improved operational efficiencies and cost management. The operating income margin expanded by 540 bps to 16.8%, with the adjusted EBITDA margin improving by 150 bps to 24.8%. Net income increased to $112.3 million, up from $76.3 million in 4Q23, while adjusted net income rose 8.4% YoY to $155.3 million. Diluted EPS stood at $2.07 in 4Q24, a 45.8% YoY increase, while adjusted diluted EPS increased 8.7% YoY to $2.88 in 4Q24 compared to $2.65 in 4Q23. The strong performance in Food Processing, combined with cost control measures and a strategic repositioning of the sales mix toward higher-margin products, contributed to the overall improvement in profitability.
FY24 Performance
For the full year of FY24, Middleby recorded a revenue of $3.9 billion, a 4.0% YoY decline from $4.0 billion in FY23. The decline was primarily due to softer demand in the Commercial Food Service and Residential Kitchen segments, partially offset by growth in the Food Processing segment. Operating income for the year grew by 3.4% YoY to $656.2 million, with an expansion in the operating income margin to 16.9%. In FY24, adjusted EBITDA stood at $866.3 million, down 3.8% YoY, while the adjusted EBITDA margin remained stable at 22.4%. Net income for FY24 was $428.4 million, a 6.7% YoY increase from $400.9 million in FY23, driven by improved profitability in the Food Processing segment and cost control measures across the business. However, adjusted net income saw a slight decline of 1.9% YoY to $510.5 million. Diluted EPS for the year was $7.90, up 6.6% YoY from $7.41 in FY23, while adjusted diluted EPS declined by 2.2% YoY to $9.49 in FY24 from $9.70 in FY23.
Segmental Information
1. Commercial Food Service
4Q24
In 4Q24, the Commercial Food Service segment reported revenue of $609.4 million, a 2.9% YoY decline from $627.9 million in 4Q23. The decrease was attributed to softer demand in the chain restaurant sector, particularly in the U.S., where new store openings were delayed due to macroeconomic challenges. The operating income for the segment decreased by 11.5% YoY to $145.3 million, with the operating income margin contracting by 230 basis points to 23.8% in 4Q24 compared to 26.1% in 4Q23. The adjusted EBITDA fell 4.6% YoY to $171.1 million, with the adjusted EBITDA margin declining by 50 bps YoY to 28.1%. Despite the decline, the segment maintained healthy margins, supported by strong demand for automation, ventless kitchens, and digital technologies.
FY24
For the full year, the Commercial Food Service revenue was $2.4 billion, down 4.1% YoY from $2.5 billion in FY23 due to weaker demand. Operating income fell by 6.7% to $574.8 million, with margins shrinking by 70 bps YoY to 23.8% in FY24. The adjusted EBITDA fell 5.1% YoY to $664.0 million, with the adjusted EBITDA margin contracting 30 bps YoY to 27.4%. The segment continues to benefit from recent acquisitions, such as the addition of Wild Goose Filling, which has strengthened its beverage-dispensing capabilities. Middleby also launched several innovations in 2024, including the Newton Gravity beverage-dispensing platform, which has been well-received by customers.
2. Residential Kitchen Equipments
4Q24
The Residential Kitchen Equipments segment reported a revenue of $185 million in 4Q24, a 2.1% YoY decline from $189 million in 4Q23. The decline was driven by continued softness in the housing market, particularly in the premium sector, where longer lead times and contractor availability impacted demand. Due to the Company’s profitability initiatives, operating loss improved 80.1% YoY to -$12.7 million from $63.6 million in 4Q23, resulting in an operating margin of -6.8% compared to -33.7% in 4Q23. Adjusted EBITDA increased by 23.3% to $24.1 million in FY24, with the adjusted EBITDA margin improving by 270 basis points to 13.1%.
FY24
For FY24, revenue fell to $724.9 million from $795.5 million in FY23 due to lower demand. However, the operating income recovered to $15.2 million from an operating loss of $12.5 million in FY23, reflecting improved operational efficiency. Adjusted EBITDA declined by 23.2% YoY to $73.6 million in FY24, with the adjusted EBITDA margin contracting by 190 bps to 10.2% in FY24. Despite challenges, the segment remains well-positioned for recovery, with new product launches and marketing investments expected to drive growth as the housing market improves.
3. Food Processing (Spin-Off)
4Q24
The Food Processing segment was the standout performer in 4Q24, with revenue increasing by 14.4% YoY to $219.4 million compared to $191.7 million in 4Q23. Operating income rose by 23.6% YoY to $58.1 million,
with the margin expanding by 200 basis points to 26.5%. The adjusted EBITDA margin improved by 200 basis points to 29.6%. The strong performance was driven by organic growth, giving credit to its good position in the bakery and protein industries, as well as the completion of several large projects during the quarter.
FY24
For the full year, Food Processing revenue increased by 1.4% YoY to $731 million. Operating income grew by 6.3% YoY to $168.4 million in FY24 and the adjusted EBITDA rose by 4.4% YoY to $187.3 million, with a 70 bps YoY increase in the adjusted EBITDA margin to 25.6%. The segment benefited from recent acquisitions, including JB T Morrell in April 2024, which expanded its capabilities in the poultry and pet food markets. Middleby plans to continue scaling the Food Processing platform through strategic acquisitions, focusing on automation, digitalization, and sustainability.
FY25 Outlook
For FY25, Middleby Corporation expects low single-digit organic revenue growth, with profitability outpacing revenue growth. The Commercial Foodservice segment is expected to see modest margin expansion and low single-digit revenue growth, driven by improving market conditions. The Residential Kitchen segment is aiming for meaningful YoY growth, supported by new product launches and operational improvements. Meanwhile, the Food Processing segment is projected to achieve mid single-digit revenue growth, though margins may dip slightly due to recent acquisitions. Sequential revenue growth is expected across all segments, with strong cash flow enabling continued share repurchases and strategic investments.
Company Description
The Middleby Corporation (Parent)
The Middleby Corporation (MIDD) is a global leader in the food service industry based in Elgin, Illinois. The Company, earlier known as Middleby Marshall Oven Company, changed its name to The Middleby Corporation in 1985. The company develops and manufactures a broad line of solutions used in commercial foodservice, food processing, and residential kitchens. Its Commercial Foodservice Equipment Group segment offers conveyor, combi, convection, baking, proofing, deck, speed cooking, and hydrovection ovens; ranges, fryers, and rethermalizers; steam cooking, food warming, catering, induction cooking, and countertop cooking equipment; heated cabinets, charbroilers, ventless cooking systems, kitchen ventilation, toasters, griddles, charcoal grills, professional mixers and refrigerators, stainless steel fabrication, custom millwork, blast chillers, cold rooms, ice machines, and freezers; soft serve ice cream, coffee and beverage dispensing, home, and professional craft brewing equipment; and fry dispensers, bottle filling and canning equipment, IoT solutions, and controls development and manufacturing. The company’s Food Processing Equipment Group segment provides batch, baking, proofing, conveyor belt, and continuous processing ovens; frying and automated thermal processing systems; tumblers, massagers, grinders, slicers, reduction and emulsion systems, mixers, and blenders; battering, breading, and seeding equipment; water cutting systems, food presses, food suspension equipment, filling and depositing solutions, and forming equipment; and automated washing systems, auto-guided vehicles, food safety, food handling, freezing, and defrosting and packaging equipment. Its Residential Kitchen Equipment Group segment offers kitchen equipment comprising cookers, stoves, cooktops, microwaves, ovens, refrigerators, dishwashers, under-counter refrigeration, wine cellars, ice machines, beer dispensers, mixers, rotisseries, and ventilation and outdoor cooking equipment. For FY24, the company recorded a total revenue of $3.9 billion. Following the completion of the separation, Middleby RemainCo will be a focused, innovation driven leader in commercial food service and residential kitchen technologies, with a focus on driving the organic growth of its portfolio of industry-leading premium brands. Middleby RemainCo will continue to build upon its market leadership in commercial food service and is well-positioned to lead future trends in automation, digital technologies, and IoT, while further extending into large attractive markets such as ice and beverage. Further, the residential business through recent commercial and operational investments, is well-positioned to capture the benefits from the resurgence in the residential kitchen market. The commercial foodservice businesses produced strong 2024 financial results with $2.4 billion in revenue, $641 million in Adjusted EBITDA and an Adjusted EBITDA Margin over 27% in Middleby RemainCo’s commercial foodservice business, and $725 million in revenue, $74 million in Adjusted EBITDA and an Adjusted EBITDA Margin of 10% in Middleby RemainCo’s residential kitchen business.
Middleby Food Processing Business (Spin-Off)
Following the completion of the separation, Middleby Food Processing (Spin-Off) will be a scalable best-in-class business focused exclusively on industrial food markets. It provides batch, baking, proofing, conveyor belt, and continuous processing ovens; frying and automated thermal processing systems; tumblers, massagers, grinders, slicers, reduction and emulsion systems, mixers, and blenders; battering, breading, and seeding equipment; water cutting systems, food presses, food suspension equipment, filling and depositing solutions, and forming equipment; and automated washing systems, auto-guided vehicles, food safety, food handling, freezing, and defrosting and packaging equipment.
Middleby Food Processing is expected to build upon its strong track record of long-term sales growth and industry-leading margins to drive returns. Middleby Food Processing will continue its focus on full-line solutions, further expansion into adjacent markets, and the launch of new product innovations to continue to bolster a best-in-class growth trajectory. Alongside its actionable organic initiatives, Middleby Food Processing’s strong M&A pipeline supports a significant growth opportunity and ability to quickly scale. In FY24, the food processing business achieved $731 million in revenue, $187 million in Adjusted EBITDA, and an Adjusted EBITDA Margin above 25%.