Graco Pays $650M for ITW’s Finishing Businesses

The acquisition will lead to new products and technology, geographic expansion, and an immediate cash flow, according to Graco.

Minneapolis-based Graco, Inc., on Thursday announced that it will purchase Illinois Tool Works, Inc.'s (ITW) finishing businesses for $650 million in cash.

The acquired businesses, which collectively employ 900 people and reported $305 million in revenue last year, will become part of Graco's industrial unit. The businesses make equipment for industrial liquid finishing, powder coating, and automotive refinishing, with significant operations in the United States, Switzerland, the United Kingdom, Japan, Brazil, and Mexico.

The sale is expected to close in June. Graco plans to finance the transaction through a new $450 million revolving credit line and $300 million of existing long-term debt, and it expects the new units to contribute to its cash flow immediately.

Graco said the acquisition will bring new products and technology to the company and extend its geographic reach.

“This acquisition is an excellent strategic fit with Graco's industrial segment,” CEO Pat McHale said in a statement. “This transaction will bring several widely recognized premium brands to Graco, a strong distribution channel, an installed base and approximately 40 percent of revenue from parts and accessories. We believe this acquisition will create long-term value for our shareholders.”

Glenview, Illinois-based ITW is a diversified industrial manufacturer of products for a variety of industries, including welding, automotive, industrial packaging, food equipment, construction, polymers and fluids, and test and measurement electronics. The company generated $15.9 billion in revenue in 2010.

Wall Street responded favorably to Graco's acquisition plans: Shares of the company's stock were trading up about 4.7 percent to $45.32 during Friday afternoon trading.

Graco, one of Minnesota's 50-largest public companies, makes equipment to measure and dispense industrial spray fluids. The company's revenue totaled $744.1 million in its most recently completed fiscal year.


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