Welcome to the Middleby conference call to discuss today's announcement on the acquisition of Welbilt. With us today from Middleby management are CEO Tim FitzGerald, CFO Bryan Mittelman, Chief Technology and Operations Officer James Pool, and Chief Commercial Officer Steve Spittle. Joining the call from Welbilt is CEO Bill Johnson. We will begin the call with opening comments and then later assemble the Q&A. Instructions on how to get in the queue will be given at that time. We'd like to start today's call with comments from Middleby CEO Tim FitzGerald. Please go ahead, sir.
Thank you and good morning. I want to thank everyone for joining our conference call on this exciting day as we announce Middleby's planned acquisition of Welbilt. Please note there are slides on our website under the investing section, which will accompany today's call. I am aware that we not only have Middleby financial analysts on this call, but we also have the Welbilt financial community, employees of both companies, customers, and other industry players. I'd like to welcome all participants to the call and thank all for taking the time to learn more about this transaction for the long-term benefit of both companies. This transaction is a transformational opportunity for Middleby and a compelling combination that will benefit our combined stakeholders.
As mentioned, with us today is Bill Johnson, CEO of Welbilt, who I'd like to thank for joining us in person at the Middleby corporate office in Elgin, Illinois. Bill and I have worked closely together and alongside our teams to bring about this transaction for the benefit of both organizations. Bill has done a tremendous job leading Welbilt over the past several years, driving process and cultural change, profitability improvements, and innovation across the Welbilt organization. Those efforts will carry on in the benefit of the combined organization. I'm very pleased that Bill will be joining the Middleby board post-closing and to support the success of the transaction. Welbilt brings to Middleby a complimentary portfolio of 12 highly recognized brands extending our hot side, cold side, and beverage offerings. Welbilt also brings a strong global presence, particularly in Asia and Europe, furthering our international expansion efforts.
Welbilt has been an innovator in products, technology, and after-sales service with FitKitchen, KitchenConnect, and KitchenCare, bringing capabilities and offerings that align with Middleby's strategic priorities. Welbilt also brings an experienced management team with deep foodservice knowledge. The combination of our two great companies creates a leading player with a comprehensive product offering, global footprint, and a portfolio of innovative solutions that position us to capitalize on emerging industry trends and better serve the rapidly changing needs of our customers. We believe the timing of this acquisition is ideal. The foodservice industry has proven resilient over the past year with an underlying strength in consumer demand for restaurants. As we emerge from COVID, there is momentum at both Middleby and Welbilt, fueled by a positive outlook for the industry recovering. Further supporting the timing of this transaction are transformational industry trends that are underway.
Product innovation, advanced technologies, digitization of the customer experience, and a higher level of after-sales support is in demand to address not only the many operating challenges of the industry, but also the rapid changes to our customers' business models. During COVID, our customers have quickly adapted to evolving circumstances, pivoting to increased demand for delivery, drive-through, pick-up, and carryout. They're also reevaluating and modifying both indoor and outdoor dining experiences. The emergence of alternative foodservice experiences, including virtual dining, ghost kitchens, and non-traditional foodservice venues, are coming into the mainstream. At Middleby, we have been looking ahead, also reinventing our business to adapt to the future of the foodservice industry. This transaction further supports these efforts, allowing us to bring together the best of both companies, positioning Middleby to meet the demands of a changing industry.
As we contemplate the many synergies and strategic benefits between Middleby and Welbilt, we have identified considerable opportunities together that will benefit our customers and shareholders for the long term. The breadth of the combined portfolio of brands and products provides to our customers a broad set of foodservice solutions across hot side, cold side, and beverage categories. This acquisition expands our global reach with extensive sales, service, and manufacturing operations in all regions, advancing the position of Middleby in Asia and other target high-growth regions internationally. The transaction accelerates new product innovation with a sharing of R&D and investments into value-added technologies and services of the future, including AI, controls, automation, and connectivity. The combined sales and marketing organization provides for efficiencies in go-to-market processes and the opportunity to provide for a better customer experience.
On a combined basis, we are better positioned to make investments in digital tools and capabilities to better engage customers with higher levels of training, culinary support, and after-sales service. The transaction also brings about significant financial benefits with synergies from supply chain initiatives, manufacturing efficiencies.
Combined selling and marketing investments, shared strategic investments, and the leveraging of corporate overhead. We have estimated these synergies to deliver $100 million in cost savings, and we expect to achieve these savings within the first three years upon closing of the transaction. Also important to this transaction is the structuring of the financing consideration. The mix of equity and debt funding the transaction maintains our balance sheet flexibility, providing capacity for strategic investments in the business, execution on continued anticipated M&A, and potential stock buybacks. In summary, the benefits of this transaction are both strategic and financial, providing immediate benefit to our customers as we can provide greater product and service offerings while better positioning Middleby for long-term growth through greater technology innovation, investments in sales capabilities, and the extension of our global reach.
I would like to pass the call now to Bill Johnson to add further comment on the transaction.
Thanks, Tim. Good morning, everybody. I believe Tim's comments about the strategic, financial, and customer benefits of this transaction are well-stated and apply equally to Welbilt. One additional benefit for Welbilt and our brands is the solving of our long-term leverage issues within our capital structures. This has been an issue that has hung over our business since the Enodis was acquired by Manitowoc in 2008 and really limited our ability to pursue a growth agenda. Combining with Middleby will result in a better cash flow generation and lower debt, which should lead to more investment in growth initiatives for all of our combined brands. I am very pleased to be joining the Middleby Board of Directors upon the closing of the transaction.
I look forward to working with Tim and the rest of the Middleby Board to support the transaction integration, delivery of promised synergies, and the long-term strategic direction of these two combined businesses. I also look forward to getting better acquainted with Middleby's great brands and people while remaining connected to all the teammates I've had the pleasure of working with at Welbilt over the last several years. I'd now like to turn the call over to Bryan.
Good. Thanks, Bill. Middleby's acquisition of Welbilt is an all-stock transfer. Welbilt share will be exchanged for 0.1240x Middleby shares. Accordingly, we will be issuing approximately 18 million shares. This will result in Welbilt shareholders owning approximately 20% of the combined company. At the time of the closing, Middleby will refinance Welbilt's then outstanding debt with the existing borrowing capacity in our bank credit facility. As noted in the materials posted to our website, upon assuming Welbilt's debt, we expect our secured net leverage ratio to be approximately 3x . We have always been proud of our cash flow engine. Our ability to grow cash flows is what has set the foundation onto which we are building today. This transaction will expand the amount of free cash flows we generate. In turn, this will fuel growth, enable further improvements to our capital structure, and drive shareholder returns.
As we've traditionally done, cash flows will be used to continue investing in innovation and advancing our technology initiatives, as well as reducing our leverage. We will have the flexibility to make strategic acquisitions and investments, and evaluating of our capital allocation options, which include share buybacks, is also something we will continue to do. Enhanced cash flows will come from a few sources: synergies, operational improvements, and lower combined financing costs. I will dive deeper into the synergies and margin impacts in a moment. In terms of financing costs, we will initially see in excess of $30 million of additional free cash flow from refinancing Welbilt debt under our credit facility at close. Delivering integration benefits and margin expansion from reduced costs and operational efficiency is something we have a solid track record of achieving at Middleby.
As summarized on page 13 of the materials posted to our website this morning, we've identified $100 million of expected synergies. We estimate it will take up to three years to achieve this run rate of savings with a target of getting halfway there in the first year after close. This is based on our initial due diligence processes, and we will further develop potential plans over the coming months. At this point in time, we won't be discussing specific tactics or strategies. Nonetheless, achieving such goals is something we've extensive experience in accomplishing. We set forth a midterm EBITDA target of 26% for the Welbilt brands. This will be achieved through the synergies as well as continued focus on improving operational efficiency. The ongoing Business Transformation Program at Welbilt also contributes to this goal.
I'd also offer that BTP efforts help drive some of the synergy items and also address operational opportunities. I will now cover some future projected results. I refer you to the forward-looking information legend contained in the documents we have posted and that I'm referring to. Slide six provides a 2022 outlook. These are preliminary projections and assume a January 1 transaction close. The $4.7 billion revenue amount is a pro forma combined view of Middleby and Welbilt and incorporates approximately 20% top-line growth at each company for 2021, and then a little above mid-single digit growth for 2022. I will also share with you that I've been undertaking a market research project.
I've enjoyed smoothies created by the Multiplex Fresh Blender, and I'm looking forward to being able to share more robust input from across my family at a future date. Our efforts may help boost forecasts ever so slightly. For 2021, the year at Middleby has started off well. Page 15 of the materials includes disclosure of order and backlog information for the first quarter of 2021. We are pleased with the meaningful growth in both these measures across all our segments. Momentum has continued to improve. You can see that Commercial Foodservice orders have now moved into positive territory. We do have an overall positive outlook for the near term, especially given the backlog growth. It will be a few weeks until we provide full Q1 results.
In the meantime, I will note that for Q1 revenue in our Commercial Foodservice segment, we do expect to report low single-digit organic growth. Even with a solid start to the year, I have modeled modest sequential revenue at this time in terms of the growth from Q1 to Q2, and for the balance of the year as well. While we are seeing good order trends, we are also benefiting in Q1 from some pent-up demand and rollout activity. We've considered all these factors as well as some risks in making our modeling assumptions. Furthermore, given the backlog levels, current market dynamics, and our operational plans, we do expect the backlog to be converted into revenue over a longer timeframe than was typical in the pre-COVID environment. Many variables are at play, our outlook will likely evolve over time.
We do continue to address a variety of challenges in the supply chain and manufacturing environment. Component availability and pricing, logistics hurdles, as well as some matters around labor, such as availability, cost, and worker safety are top of mind for us. While we are still generally optimistic overall, these headwinds cannot be ignored. We entered the year with confidence around our expected performance. Given how the year has started and how our outlook has evolved, our view on this acquisition has been bolstered. We enter into this transaction on very solid footing. Our financial strength, management capabilities, integration experience, and market conditions all support executing this transaction at this time. I'm personally excited about what our future holds. We have built a strong company with leading margins and cash flows. Onto this base, we look forward to adding a collection of world-class brands and talented people.
Lastly, a quick but much-deserved and hard-earned thanks to the teams behind the scenes at both companies who have helped bring this deal together. I know we've now just reached the starting line, but thanks for getting us here. Tim, back to you.
Thank you, Bryan. Before we open to questions, I would like to outline what happens next. There's time between this announcement and the close of the transaction as we seek shareholder approval and the completion of closing conditions. As a result, we anticipate the transaction will be completed by the end of 2021. During this time, Welbilt and Middleby will continue to operate as separate independent companies. We expect questions from our customers, the sales reps, channel partners, suppliers, employees, and other stakeholders about our future plans. We have yet to fully develop those plans and will be limited in what we can communicate until the transaction closes. Keeping this in mind, we are limited in our ability to answer questions about future plans for the combined company at this time.
With that in mind, I'd like to ask the operator, Joelle, to open the line now for questions.
Thank you. To ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Mig Dobre with Baird. Your line is now open.
Good morning, everyone. Congratulations on the deal, well, I guess this Wednesday is working out to be a little different than what everyone has planned. My first question is really surrounding the mechanics of the deal. You expect this deal to be completed by the end of 2021. This is a pretty quick close here, how confident are you on this timeline? As it relates to this, do you foresee any pushback from an antitrust perspective? Can you comment on that specifically as it pertains, I think, to the hot side of your business and Welbilt's business?
Yeah. Mig , we're not going to make a whole lot of comments on regulatory, which is part of the process. I think the first step is getting through shareholder approval, both our teams will be working on that expeditiously. You'll probably see shareholder materials come out in the next 40, 45 days or so. Regulatory, there's always filings with transactions. We've done that many times over, that'll happen here in due course, we've got a number of jurisdictions. We spent a lot of time looking at that. Feel pretty confident in the positions. As you look at the businesses, they really are highly complementary, probably more than what most people would appreciate both in terms of products as well as geography. That's something that we've looked at hard, I think we feel confident about the work that we've done in that regard.
We're limited really at this point in time in what we can say, given you've got legal teams that are working on the filings.
I understand that. I guess maybe if I can take a different line here. As you're looking at the combined product portfolio, are you comfortable with potentially pruning where appropriate, in order to get this deal to move forward?
Okay. Again, I'm sure that you will get the question asked five times, but I'll probably answer about the same each one. We are confident in getting to the finish line with this transaction. I would say, again, as you go through it's a highly complementary transaction. We're operating in a pretty highly fragmented industry with lots of new players all the time. We've, again, been thoughtful about it and have a high level of confidence that this will get to the finish line.
Understood. If I may, a question for Bill Johnson. Bill, there's a lot of work that you have done here, you and the team, over the past couple of years at Welbilt. I'm very curious to get your perspective and the board's perspective as to why this combination with Middleby makes sense from the standpoint of the Welbilt shareholders. Why is this the best route going forward to create value?
Yeah. Well, as Tim said in his comments, it's highly synergistic. There's lots of value. The landscape is changing. The markets are changing. There's a lot of innovation required. A lot of digital is coming, and with the combined company, we feel that we're stronger together addressing those changes in the marketplace, and we really feel that it benefits the Welbilt shareholders greatly to have the strength of those combined brain trusts of the companies together. Board's complete support of this transaction, as I am, and we look forward to really working with the Middleby team.
Understood. A final question before I get back in the queue. Maybe picking up on those comments from Bill, I'm sort of curious. FitKitchen, you mentioned, Tim, as something that Welbilt has developed and it's a competitive differentiator. KitchenConnect is also obviously a product that the company has worked on for a while. At the same time, you have Powerhouse Dynamics in your own offering on the IoT side. I'm kind of curious as to what your plans are for integrating these platforms and how you think over time this will create some kind of competitive differentiation, if anything at all, for you in the marketplace. Thank you.
Yeah. No. Mig, I think it goes to a lot of the transformational trends that are going on in the industry and things that both of our companies are investing in heavily. I know as we've got on calls, we've talked about making incremental investments of $20 million, $25 million a year in initiatives like that. As you look, both companies have similar objectives. We may approach it somewhat different, and I would say, in many ways, that's pretty complementary in terms of what the Welbilt team is and what the Middleby team is doing.
I think having kind of the shared brain trust of being able to put together a complementary set of solutions in that regard will allow us to go faster, will allow us to get there more efficiently in terms of thinking about the spend and really provide a better offering to our customers, which is really fundamentally the most important thing to both of us here. We really see that as a great opportunity and one of the benefits of coming together.
Great. Good luck, guys.
Thanks.
Thank you. Our next question comes from Saree Boroditsky with Jefferies. Your line is now open.
Hi. First, congratulations on the transaction, and Bryan, I also enjoy that smoothie machine. Two things. I guess first, can you comment on the potential synergies not included in the $100 million? How are you thinking about the cross-selling opportunities? For my second question, just outside of the deal, we're obviously hearing strong demand, and that shows up in your orders, but longer lead times for Commercial Foodservice. Maybe you can just comment on what you're seeing from the supply chain, and I'll leave it there. Thank you so much.
Saree, it's a great question, and certainly, we expect that there will be long-term benefits of the companies coming together, and that is one of the primary benefits. This is a long-term strategic transaction. That's how we really approach all of our M&A. Again, kind of going through how we can provide better offerings to our customers, service support capabilities. The global reach is really an important aspect as well. Behind that is, as you move forward, past kind of an initial integration period, that brings about positioning in different market segments and complementary market segments where we do expect that that will enhance longer-term revenue growth. That's not something that we've kind of baked into that initial $100 million of synergies. The second question, I think, was about Bryan drinking out of the Multiplex unit and what the financial impact of that was going to be.
No, I'm sorry. Actually, I don't remember.
Supply chain matters and challenges we're facing.
So—
Lead times.
Yeah, I think that is a near-term challenge of the entire industry. Obviously, things are improving. There's a lot of volatility right now as orders come back online and different cadence with many customers, and there's a lot of disruption in supply chain. Those are issues we will work through, not only us, but really the industry as a whole over the next several quarters. It is somewhat disruptive in terms of production. I would chalk that up to really a near-term issue that we'll get ahead of as we get through the latter part of the year.
Great. Thanks for taking my question.
Thank you.
Thank you. Our next question comes from Jeff Hammond with KeyBanc Capital Markets.
Hey, good morning, everyone.
Morning, Jeff.
Just on the synergies, can you just clarify the $50 million year one run rate? Is that a run rate exiting the year, or what's your actual synergy number for 2022? I guess, do we get all of the $20 million of Business Transformation in 2022?
Yeah. I'll start with the last half. The Business Transformation, $20 million, is certainly expected to be fully realized at a minimum in 2022. The $50 million will be at a minimum run rate level by the end of 2022. Certainly, we'll be working on undertaking planning activities as we get to the close, but it'll take a little bit of time to get the full benefit of all actions that are potentially going to be taken.
Is a lot of the early savings just corporate costs and public company costs? How much of that $32 million of corporate comes out in year one?
There probably is a good chunk of that that does come out in year one. Obviously, as we talked about, some of it depends on the timing of such and when audit requirements and board costs and the such change. There still are certainly a lot of things needed to continue to be done to keep the companies operating as we will be independent. Certainly, I guess it's what's behind your question, things that are more operational or sales and marketing oriented do likely take more time than the corporate side to implement.
Yeah. Jeff, I would just add a couple of things. One, we just announced the transaction, right? In terms of specificity of the timing of how things roll out, we'll have a better understanding as we engage further, particularly post the transaction. I think what we have a high degree of confidence in is the total amount of synergies. The timing to get there quarter by quarter, year by year, that'll evolve. I think we feel pretty confident that within the three-year period, that's very achievable.
Okay, last one. As you, maybe after this transformational deal, revisit the portfolio, how do you think differently or the same about the other two businesses, which I think after the deal closes, will be much smaller, Food Processing, Resi Kitchen, in terms of fit and growth from here?
Just making sure I understood the question, those are very strategic, synergistic platforms to Middleby. Nothing changes on our view on the importance, and I think, my opinion, both are still in early stage of what the long-term opportunities are for both. There are synergies, by the way, that come out of this transaction that I think will help both of those platforms. I think that is one of the things that we're looking forward to. I would also say, as we talked about with the capital structure, we're in a very comfortable place after completing this transaction with a higher degree of cash-flow generation.
In a lot of ways, that allows us to not only continue on M&A and investment as we have done, but some of that accrues to those platforms as well as we're thinking about making investments further into Residential and Food Processing.
Okay, great color. Thanks, guys. Congrats.
Thanks.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. Our next question comes from Joel Tiss with BMO. Your line is now open.
Hey, guys. How's it going?
Good. How are you, Joel?
All right. This is really fabulous. I'm very excited. I wonder if you can maybe generically give us any sense of how the authorities look at these different categories. Do they drill down into different categories? Are they more holistic just based on your historic experience? Are they looking at rapid cooking, or do they drill all the way down into stuff like frying? Any just even generic, not even related to you guys, thoughts about how the authorities look at the bigger categories.
Yeah. As I said, I know you guys will take another shot at that, and thank you, Joel, for doing that. I think we're going to refrain from that right now. I think certainly we spent a fair bit of time on that. I will profess, again, we've been thoughtful about it, but I also am not a antitrust attorney, so probably best luck for those guys. I'll just, again, say that we've done our homework, we've been thoughtful about it, and really aren't going to make comment further on that at this point in time.
Oh, okay. No, that's fair. Just a quick follow-up for Bill. Can you think of any areas where having a much larger platform is really going to accelerate your ability to get some of the margin improvement and the cost savings that you guys have been targeting for a while?
Well, Tim laid out the synergies, right? There's some BTP savings on top of it. Those things kind of blend together a little bit, and they get overlapped, and there's lots of interactions. As we take a look at those things post-closing, there are a lot of opportunities, and there's a lot of overlap there. Obviously, having more buying power with suppliers is helpful. There's a lot of this supply chain stuff we've been working on gets benefited by being in a larger organization. I think that certainly for logistics, purchasing power.
Just on the innovation side of things, I think, bringing these two great engineering companies together and putting all the best minds together in the industry that you can, you're just going to get better solutions. That's going to benefit our customers greatly. I'm really excited about it.
Okay. Thank you. I appreciate it.
Thank you. Our next question comes from Tim Thein with Citigroup. Your line is now open.
Oh, great. Thank you and good morning. The first question is just on how you're planning to manage this from an integration standpoint. As you think about just the go-to-market strategy and, frankly, the cultural DNA of the two companies is quite different from the standpoint of Middleby being very decentralized and brand by brand, whereas Welbilt historically has gone to the market as a portfolio. How do you plan to merge those two, or what consideration have you given towards that?
Well, I think there's a couple pieces there. First off, I think there's great chemistry between the teams, and I think the relationship that Bill and I have is very strong, and it's been very collaborative, and I think that moves through the rest of the organization. I think that we will get the best out of organizations because of the dynamic between the teams. I think culturally, there actually is a lot of similarities. I think there may be some differences in operating philosophies, but culturally, both companies are focused on innovation. We're very focused on taking care of the customer. Those things are critically important to us, obviously, and that'll carry forward. I think as we've both been evolving, Middleby, we are very focused on being on the brand, being decentralized, empowering our people. That will continue.
That being said, we've also surrounded our brands with capabilities and tools, whether that's technologies, whether it's sales resources, et cetera, and that will continue. Really, if you look at Welbilt, Bill has actually been pushing, I would say, more autonomy back to the brands over the past year or so. In some ways, they've been moving a little bit more towards how we've been operating. As you look at some of the shared synergy about how do we get the best out of both organizations. I've got a high level of confidence that we'll be able to really work together to get the best out of what each organization is doing.
Got it. Then, a lot of mentions, Tim, of just how the markets are changing and certainly a lot of labor issues that your restaurant customers are dealing with. As you look out beyond just the near-term order improvement that you're seeing, can you speak to maybe the longer-term project pipeline and what you're seeing? The kitchen redesigns and things like that obviously take some time to develop. Are you actually seeing that? How is that shaping up? Meaning, are you starting to see some of this actually translate into more discussions and kind of longer term opportunity from the standpoint of, again, integrating all this AI and automation, et cetera, into the kitchen.
This period is accelerating how people think about their operations, right? Because the customer trends are changing, the operating challenges are increasing and just kind of fundamentally, again, operators need to rethink their business models, and there are new operators coming into the foodservice industry that are coming in with new business models, right? That is creating a dynamic and a pace of change that I don't think the restaurant industry's had in decades. By the way, there's new technologies out there that didn't exist decades ago, right? I think that is one of the fundamental things here. There's lots of great reasons for this transaction, but I do believe that we're at an inflection point, and an inflection point does take years sometimes. We're at the beginning stages of that.
It is one of the benefits of us being able to meet those needs of our customers in a different way. Yes, we are seeing, again, new entrants, existing customers thinking different, engaging with us in different solutions and technologies that they've had in the past. Some of it is more, I would say, practical. What's the next generation? Some of it is further forward-looking. Again, we think we've been looking years ahead, but we've been kind of delivering to our customers what's immediately up to bat. I do think we're engaging on both right now.
Again, one of the reasons why I think this is a great time for the transaction for both of our organizations. It really does allow us to bring a better breadth of solutions and for us to, in a smart way, invest in the down the road technologies.
Got it. Thank you.
Thank you. Our next question comes from Todd Brooks with C.L. King & Associates. Your line is now open.
Hey, good morning, everybody, and congratulations on the announcement of the acquisition. Very exciting.
Thanks, Todd.
Two quick questions. You're welcome. Two quick questions. One, Tim, when you were talking about the regulatory, I won't drill down from the attorney side of things as far as putting the two companies together, but you'd mentioned that it's a surprisingly fragmented industry, both across product lines and across geographies. Do you have any data on kind of the combined entity, from a market share standpoint that you can share with us so that we can assess how truly fragmented these end markets are, and maybe handicap from our side what we think about the deal getting through regulatory review?
The simple answer is no. Honestly, it's very difficult to measure market shares in this industry. There's lots of private companies and there's lots of new entrants every year. You'd be surprised at the size of some of the companies that are off the radar. There's always a lot of focus on Middleby and Welbilt because you all follow us, and we're kind of pure plays in the industry. There is surprising amount of companies out there. It is because many of them are global, many of them are private. There's limited data out there.
Okay. Just the final question. If we talk on the R&D and innovation side from two angles, one, looking at both Middleby and Welbilt, kind of leaders in the space from an innovation standpoint, farther along on cloud-based solutions and automated controls for the equipment. I guess, do you think of R&D going forward as a true brand differentiator for the combined platform, where for somebody to drop to a second and third competitor from a competition standpoint, putting the two leaders together from a controls and cloud-based standpoint together, that it really will change how customers are thinking about the combined platform and really give you a branded advantage from a capability standpoint over others?
I will maybe start a little bit, and I'll kick it to James. Look, this is a new area, right? There's lots of players that are not in foodservice today that provide cloud-based solutions and point-of-sale systems and software, et cetera, to our customers today. In some ways, we're kind of in the infancy stage, but we also think we can provide further value-added solutions to our customers because we are the equipment guys, and our objective is really to provide more value to our customers. That's a big investment that, again, we're committed to so we can provide those higher ROIs, so we can help them operate their kitchens more efficiently. It is an important strategy to both of our organizations Welbilt and Middleby coming into this.
I'll kind of just add James, because he's really the driver of it here on the Middleby side.
Yeah, I think just synergistically with the companies coming together, I think the synergies give our customers the ability to have platforms to choose from controls to connectivity to IoT, to give them a broad choice of user experiences from connectivity options in the field, even to automation. We don't view this by any means as one solution, but many solutions in the market moving forward to provide our customers with just greater flexibility and intuitive, smart, connected controls.
Okay, great. Thanks, and congratulations again.
Thank you.
Thank you.
Thank you. Our next question comes from Larry De Maria with William Blair. Your line is now open.
Okay. Good morning. Thank you.
Hey, Larry.
Hey, Tim. Hello. I know you're not crazy about going down the line of questioning on the market share, divestitures, and stuff. It seems like most of the complementary aspects are geography in the cold side. I know we've all talked market share before in some of these categories in the hot side. If we think about where some of the main overlap is, and I'm thinking speed cook with TurboChef, Merrychef, and fryers, pizza ovens, some of these big categories. In North America, aren't these categories are all probably 70% combined share Middleby and Welbilt? Is that a fair statement, or is that too high? That's what I think we've all been sort of learned in the last few years.
Okay. Thanks again for asking the question. No, there are lots of players. I mean, you can probably come up with 100 fryer manufacturers globally. It's easier to be a global company today, by the way, than it was before. You see products that are going across border all the time. By the way, lots of our customers are global in nature as well. I mean, there are a lot of players in all of these categories. Certainly, I'm not going to quote market share percentages. I also wouldn't necessarily agree with what you just mentioned there. Certainly, there are areas that we both play in on the hot side, but we are not the only ones to play there.
Many competitors. I think you will also see that there's a lot of competitors that move across different categories offering solutions. There's not only one solution to what a need is for our customers. Again, we're aware of where there are some potential overlaps. Again, by and large our platforms are complementary. Even where we see each other, they're often very differentiated solutions.
Okay. Thank you. Maybe switching gears, can you talk about, and maybe Bill, the genesis of the deal, how quickly this come together? Bill, was there much other interest? Is this something you guys sort of shopped around and tried to get done? Just a little bit more background on the deal, how it happened, and et cetera.
Yeah, there'll be a proxy put out on this, and it'll detail all of how the deal came together, and I think we'll just wait and leave it for when the proxy comes out.
Okay. Can I sneak one more in here? Can you just talk a little bit about what do we expect the reception from the distribution and clients to be, and if you would expect any changes in go-to-market through the distributors, and et cetera, or do we just consolidate into one go-to-market strategy? Can you just talk about the distribution and potential for acceptance or blowback, and I'll leave it there. Thanks, and good luck.
Even today, just remember Middleby's got lots of different solutions and go-to-market strategies. I will just say, one of the things that's really important to us is our strategic partners. There's a lot there that I'm talking about, but we've made a significant effort over the last several years to get closer to them. I think this transaction allows us to better support them as well, and they're an integral part of our organization in delivering value to our end user customers. I think the breadth of the solutions that we'll have together, the ability to support those partners, in a better way, whether it's training, whether it's hands-on through culinary, that's an important aspect of this transaction. I would say, it's not a change in the approach that we've already had.
It is really additive to the approach that we've had to working closely with our strategic partners.
Okay, thank you. Good luck.
Thanks, Larry.
Thank you. The last question we have time for today is a follow-up from Mig Dobre with Baird. Your line is now open.
Okay. All right. Thank you for taking a follow-up. Just sort of a quick clarification for modeling purposes here. On slide 13, where you're talking about incremental Welbilt annual Business Transformation Program savings of $20 million. My recollection is that the Transformation Program at Welbilt was aiming for $75 million of total savings. Am I to understand here that, $55 million had been already realized, and you guys are just attending the last $20 million here? Or is there a component of that $55 million that's kind of baked into the manufacturing supply chain and operations optimization synergies as well?
Yeah. Mig, I'll take this, and Bryan can correct anything that I'll say wrong, which is usually the case. I think as we've looked at it, we've really looked at BTP in maybe a nearer term approach. We wanted to make sure that we really, in terms of the Middleby side, modeled this appropriately, thinking about what is realizable in the short term. Also recognizing that we're in a period of disruption, right? You've had supply chain disruption that we're all going through. We've kind of come through crisis mode. As the Welbilt team's been trying to put BTP in place, you're also going through a period where you've got employees furloughed as volumes are moving all over the place. I think, the way we've approached it is, what do we have clarity on?
What are we comfortable not only putting in a model, but as we're thinking about the companies coming together? Then I think, as we're thinking about the $100 million of synergies, certainly the work that the Welbilt team has done and will continue to do benefits those numbers. Whether that is a Middleby synergy or there's some BTP in there, or maybe it's the two of us coming together, I would say there is some element of that. I would say, these guys have done a lot of good work around supply chain. They've done a lot of good work also around the manufacturing processes and efficiencies. We've had a chance to tour a few of the facilities, and they've made investments in production equipment, streamlining workflow on the operations. Again, kind of go back to the opening comments, that I think there's momentum at both companies.
There's great things going on at Middleby, by the way. I think we're coming into where it's a good time for both companies to come together, and that will be a backdrop of some momentum from the work that they've done through that BTP. Perhaps give us greater certainty in the synergy number that we put forth.
Okay. Understood. Final question. You talk about this deal being accretive in year one. You're a little more clear as to what the accretion is in year two. I just want to make sure that I have sort of my math right here, Bryan. Back of the envelope here, I'm getting something, $0.40-$0.50 accretion in year one. Am I off? How do you think about it?
Well, we've commented that it's double- digit in year two, and I guess that implies that it's single- digit in year two. That would be single- digit for the first year. I guess if you apply that math, you're kind of in the right neighborhood.
Okay. Appreciate it. Thank you so much.
Thank you. We do have an additional question in the queue from Tom Simonitsch with JPMorgan. Your line is now open.
Good morning, thanks for taking my question. I appreciate your comments on pro forma balance sheet flexibility, will you have the bandwidth to pursue smaller deals while integrating Welbilt, or should we expect to see a pause on M&A when this closes?
It is a core competency of Middleby, is M&A. As you just said, flexibility in the balance sheet. I think we are not ruling out that there may be some other M&A. If it's smart M&A, things that are strategic and additive in the interim period, those things are still a potential. This transaction is very significant, meaningful, and it is job one. I also want to be very clear, we're very focused on this being successful for both organizations, so we will not get distracted. I will say, we've got not only balance sheet flexibility, but we have an excellent management team that is very equipped to take on this transaction, along with an excellent management team at Welbilt as well.
I feel very comfortable from that standpoint, that that'll be one of the important things to get to a successful transaction. Again, we're going to continue to build the combined business for the long term. As things come up through the course of the year, that you may see other things announced.
I'll leave it there. Thank you very much. Good luck.
Thank you.
Thank you. This does conclude the question- and- answer session. I would now like to turn the call back over to management for closing remarks.
Great. Thank you, Joelle. Just in closing, I would like to once again share my enthusiasm and all of our enthusiasm about today's announcement. The combination will create a premier food equipment company and a foodservice platform well-positioned to deliver for customers through complementary products, global reach, best-in-class service, and forward-thinking technology solutions. At Middleby, we have a long track record of successful strategic acquisitions, and we are confident in our ability to bring about the same results with this transaction. Again, thank you, everybody, for joining us on this morning's call, and look forward to speaking with you at earnings.
This concludes today's conference call. Thank you for participating. You may now disconnect.