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Aga Rangemaster sold to US kitchen products specialist Middleby for £129.2m

* Aga-pic.jpgYet another iconic British brand is to come under to US ownership, with Aga Rangemaster being sold to US commercial foodservice, food processing and residential kitchen equipment giant the Middleby Corporation for £129.2m.

However with Middleby promising to keep production in the UK, hundreds of jobs are likely to be saved at the company, which employs around 2,500 people worldwide.

Middleby, which owns the Viking brands amongst many others, believes the acquisition of AGA presents an attractive opportunity to extend its global reach in the premium kitchen appliances segment. AGA's world class brands, including AGA, Rangemaster, La Cornue and Marvel, complement Middleby's portfolio of global brands, thus providing a comprehensive line-up of products and technologies with global reach and greater scale.

The acquisition will open up new lines of distribution for AGA to expand its distribution of products outside of the UK, using Middleby's existing customer relationships, sales capabilities, marketing expertise and supply chain infrastructure. In addition, Middleby will seek to promote greater product innovation through use of product and technology sharing from Middleby's existing portfolio of brands.

"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," said Middleby's chairman and CEO. "It will expand Middleby's local manufacturing platform and significantly increase our presence in the UK market.

"We believe this transaction will provide meaningful synergies as we build upon the combined strengths of both Middleby and AGA. We will leverage the existing sales, service and manufacturing capabilities of AGA with the Middleby market expertise, product innovation and well established global distribution network."

Explaining the reasoning behind the sale, John Coleman, chairman of AGA said: "The Board of AGA has been assessing the development opportunities for the business for some time and in January 2015 appointed Rothschild to help in the process. With the major product development programmes of recent years now largely completed, the Board has sought to identify the commercial triggers that have the potential to bring more rapid growth.

"Middleby provides a larger scale framework including an established international structure to deliver fully on the potential of the business. The financial strength of Middleby also achieves a better balance with AGA's pension obligations - which are large in relation to the existing business and which have become a significant constraint on the progress of the Group."

William McGrath, chief executive of AGA added: "AGA is a leading international premium consumer brands group, manufacturing and distributing some of the best known and loved kitchen appliances and interiors furnishings in the world. Our innovation and investment over recent years has created a new generation of products relevant to today's consumer.

"AGA will be the European platform for Middleby and our cookers will be sold through Middleby distribution channels, which will increase 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."

Middleby is an experienced acquirer of businesses - having purchased over 20 companies in the past five years - and has a strong record of integrating businesses successfully. This latest acquisition positions Middleby as a leading global manufacturer in the premium segment for residential kitchen equipment, a market segment it estimates to be worth over US$1 billion globally with increased presence in international markets and global scale.

Middleby believes that AGA is well positioned for growth and has the potential to deliver significant profits mainly as a result of the recovery of the UK and European markets as well as through taking advantage of synergies with Middleby's residential and commercial platforms.

In the first half of 2015, AGA traded ahead of the prior year and anticipates progress in 2015 in line with its expectations. However, while there is a relatively broad range of brands and products for the AGA Group to promote, the scale of the AGA Group today and its current geographical penetration is constrained by the significant impact that the AGA Pension Schemes have on the AGA Group's resources.

The AGA Pension Schemes, of which the AGA Group is sponsor, are large relative to the size of the AGA Group as a whole and are in deficit. As at 31st December 2014, the ARG Pension Scheme had assets of £867 million (excluding defined contribution funds) and reported a deficit on an IAS basis of £69 million. Over recent years, the AGA Pension Schemes have restricted the strategic options available to the AGA Group and limited management's ability to invest in further growth opportunities.

For example, the resources available to the management team to promote and develop the AGA Group's products have been constrained and as a result, the AGA Group brands have not been grown or exploited to their fullest extent.

The relative size of the AGA Pension Schemes and deficit has also contributed to an increase in the financial risk profile of the AGA Group from a shareholder perspective. As an independent company, the cash flow position of AGA is expected to continue to be affected by pension contribution payments which are both material relative to the profitability of the AGA Group and inherently uncertain due to fluctuations in interest rates.

No dividends have been paid to shareholders for the last three years and the Board of AGA does not anticipate being able to resume dividend payments in the near term. In this context, as previously announced AGA has, for some time, been considering a range of strategic alternatives as the Board of AGA seeks to develop the AGA Group in order to deliver more rapid growth leading to increased shareholder value.

www.agarangemaster.com / www.middleby.com

17th July 2015

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