New US owners insist Aga is here to stay after £129 million deal

Illinois-based Middleby Corp completed the purchase of Aga Rangemaster after the deal was agreed by key shareholders.

The manufacturer, which employs hundreds of people in Telford & Wrekin, has been snapped up in a move that bosses say protects pensions and will open up new markets for the well-known Shropshire brand.

Middleby moved to allay concerns over the future of Aga's UK manufacturing operations, saying it "recognises the importance of Aga's presence in the United Kingdom and intends to maintain Aga's manufacturing operations in the UK".

But the American food giant plans to carry out a strategic review of the business following completion of the deal, which is expected later this year.

It's a big name, and has an illustrious history which can be traced back hundreds of years to the birth of the industrial revolution.

As with many modern companies, Aga Rangemaster is an enterprise with complex DNA reflecting twists and turns over many years.

But it is also a firm which is proud of its heritage and has continued the spirit of innovation which drove those early pioneers.

Its iconic Aga and Rayburn products have been household names for generations and through the Coalbrookdale Works, it has a direct association with one of the major advances in human history.

It was there, in the Ironbridge Gorge – now celebrated as a World Heritage Site – that Abraham Darby perfected the art of melting cast iron using coke instead of charcoal. That key development in 1709 was to set in train a process which has created the modern industrialised world.

The Coalbrookdale Company became part of Allied Ironfounders in 1929, which was a grouping of various foundries across Britain – particularly in Scotland.

A new history book produced by Aga Rangemaster and based on minutes of its board meetings from yesteryear in its archives reveals a titanic 1930s battle that took place between Allied Ironfounders and the Swedish firm which produced Aga cookers.

When Allied brought out a direct rival to the Aga, called the Thermecon, Aga Heat – backed by Aga Sweden – sued for breach of patent.

The Allied board found a pragmatic solution. In 1935 they bought Aga Heat, on condition that the patent litigation was dropped.

In a later development, a new Aga works was built at Ketley in 1947.

In 1968 Allied Ironfounders was acquired by Glynwed, which decided to consolidate the Ketley and Coalbrookdale foundries into one at Coalbrookdale.

In January 2001 Glynwed agreed to sell its Pipe Systems operations to the Belgian group Etex for £786 million in cash.

Aga Foodservice Group became the new name for the group – that in 2002 focused on creating a major international consumer brand-led operation which had Aga at its heart.

In 2003 Aga-Rayburn and Rangemaster enjoyed record performances and the years that followed were to see further acquisitions and product innovations.

In 2008 Aga Rangemaster replaced the Aga Foodservice Group.

And it warned: "Until such review is completed, Middleby has not made any firm decisions with regard to Aga's business."

Aga employs about 120 people at its historic foundry in Coalbrookdale, and a further 300 at its factory in Ketley where it designs and manufactures its well-known line of ovens.

Aga chief executive William McGrath said: "This provides resolution to the thing that has been a nagging issue for a long time, which is the relative scale of the pension scheme.

"The bigger group gives us a larger covenant, and we can ensure that energy and resources are put behind the brand, to crack some overseas markets.

"By being part of a larger group that has the infrastructure to make that happen, and that has to be to the benefit of the teams back in the UK."

The 185p per share offer hands investors a 77 per cent premium on the price at the close of play the day before the talks were first revealed last month. It is also 88 per cent higher than the average price recorded over the last year.

Mr McGrath added: "Aga will be the European platform for Middleby and our cookers will be sold through Middleby distribution channels, which will increase our growth rates in North America and in other international markets. We believe Middleby will build on our progress to date and successfully develop our iconic and unique brands for the future."

Aga posted pre-tax profits of £700,000 for 2014, down from £1.1 million in 2013, as revenues rose to £261.5 million from £250.4 million.

The takeover deal is the result of months of talks and years of planning.

It is expected to be rubber stamped by the end of the year, with the company's biggest sha reholders already giving assurances backing to the takeover.

But what does the move mean for this most historic and famous of Shropshire brands? And what comes next?

Aga bosses insist that the move will be of benefit to the company's local workforce, settling a long-standing, £69 million pension deficit and creating new business for the company's local factory and foundry.

"This is a growth story," said chief executive William McGrath. "The way we are developing Aga with more focus on production at the factory should be a positive. We are looking to move volumes here, with levels of the new product coming through. We are not looking to see any radical alterations to our strategy.

"What we have been looking at is to ensure that the volume through the factories goes up, and if that happens that can only be for the benefit of the workforce as a whole."

He added: "Middleby, as a larger group, will provide new impetus to the business and hopefully Aga will thrive under its umbrella."

While the move will allow some of Middleby's previously acquired product ranges – such as the Viking line of cookers – to be introduced into the UK market, that is more likely to be incorporated into the less-specialised Rangemaster side of the business, based in Leamington Spa.

Selim Bassoul, chairman and chief executive officer of Middleby, said the move would add an important new brand to the Illinois-based goods giant's portfolio.

"The addition of Aga's world class brands, product range and manufacturing capability to our existing portfolio will further strengthen Middleby's global reach and enhance our position as a leader in the premium segment for residential kitchen equipment," he said.

"This acquisition will expand Middleby's local manufacturing platform and significantly increase our presence in the UK market.

Aga Rangemaster, which makes its iconic cookers here in Shropshire, is being sold to a company based in Illinois, America, in a deal worth £129 million.

When something like this happens it sounds like it should be good news, in that the firm is so internationally desirable that somebody is keen to buy it, and that a bigger group will mean in turn greater clout, and whole new markets will be unlocked.

Generally, though, it is best to suspend judgment until we know what happens next.

Hundreds of Shropshire jobs are at stake and the new owners have made some reassuring noises about the future of the UK business. They have though also spoken of plans to conduct a strategic review of the business once the deal is completed.

New owners, and new owners talking about a "strategic review" to boot, mean that workers will be wondering how things are going to pan out in practice and what it all means for them.

The coming months will provide the answers.

"We believe this transaction will provide meaningful growth opportunities as we leverage Aga's existing sales, service and manufacturing capabilities with Middleby's market expertise, product innovation and well established global distribution network."

Local union bosses are also positive about the prospects of the move, and Unite regional officer Matt Jones said: "Unite and our members are hopeful of a positive relationship with Middleby Corp and are hoping the takeover is a positive step for job security and investment at the Telford and Leamington Spa sites.

"Middleby Corp's global marketing and distribution could be a huge positive for the Aga product range's growth."

Aga's owners appointed financial advice group Rothschild to look for a buyer early this year. The company has been making a public play of its attempts to reposition itself for new markets for some time, introducing a string of new products and finding partners to take it into new markets.

Aga moved into China for the first time earlier this year, which combined with the release of the mini-Aga for use in smaller properties was aimed at creating an Evoque moment – aping the success of JLR in wooing the growing Asian middle class.

It has invested heavily in bringing its production facilities in Telford up to the mark, with the opening of a new sand plant at Coalbrookdale in May being hailed as a guarantee of the plant's future.

Now, we can see that these actions were even more strategic than they looked. As well as building a platform for growth, Aga was repositioning itself so it could tempt a wealthy backer to take the brand on.

In Middleby, Rothschild found a company which is in the midst of a spending spree and has access to all the markets that could transform Aga into a global brand.

The American firm has completed 20 acquisitions over the last five years, in a variety of business sectors, including in the UK. Lincolnshire-based catering equipment firm Lincat was snapped up in 2011, and Norwich-based slicing equipment firm Marel in February this year.

It says the range of brands coming into its group will complement those it already owns, so Aga is a brand that is very much here to stay. Last year, Middleby achieved sales of US $1.63 billion (£1.04 billion), and profit of $193 million (£123 million).

"We are providing a European platform," said Mr McGrath. "They are keen to have the premium brands, and Aga Rangemaster provides exactly that. They have international distribution strength in North America and into South America, and with the work we have been doing the opportunity to progress in those markets is increased.

"What it means for the business is the work we have done in developing new products, will have more opportunities to progress in international markets more readily than we would have been able to under our own steam."

On his future, Mr McGrath added: "The next thing is to get it through, and as part of the Middleby Group. What happens thereafter is for them to say. We are committed to do whatever is needed to get the growth story going for the Aga brand."

The new partners in this venture, a jewel in the crown of Shropshire's oft-overlooked manufacturing backbone, are certainly talking a good game. The big question is how they make the most of the promises they have made.