Proposed FTC Order: Graco Must Sell Acquired Biz Units

Amid anti-trust concerns, the company had proposed selling some of the liquid finishing businesses that it recently acquired from Illinois Tools Works, but the Federal Trade Commission is seeking public comment on a proposed order that would require it to divest all of them.

Amid antitrust concerns, the Federal Trade Commission (FTC) has issued a proposed order that would require Minneapolis-based Graco, Inc., to sell all of the liquid finishing businesses that the company recently bought from Illinois Tools Works (ITW).

The FTC is now seeking public comment on the proposed order. The 30-day public comment period will end July 2, at which time the FTC will issue a final order that will identify the products, businesses, and assets that Graco must divest. The company will then have 180 days to sell the businesses.

The liquid finishing businesses comprised the majority of Graco’s $650 million deal with ITW that closed in early April. The deal also included ITW’s powder coating unit.

Graco Chief Financial Officer James Graner told Twin Cities Business on Monday that the company was “disappointed” with the proposed FTC order, adding that Graco had proposed a settlement under which it would sell some, but not all, of the liquid finishing businesses that it acquired from ITW.

Graco CEO Patrick McHale said in a statement that “the settlement proposal put forth by Graco was more than sufficient to allay the FTC’s concerns about future competition in the marketplace.” However, he added that the company will abide by the FTC’s final order when it is issued.

Graco announced plans for the acquisition in April 2011, expecting the deal to close in June of last year. But last July, the company revealed that the FTC had raised antitrust concerns and requested additional information regarding the proposed deal.

In December, the FTC sought to block the deal and filed a lawsuit in federal court. The agency said at the time that “combining competitors in these markets would be a bad deal for manufacturers and consumers, and would leave them facing higher prices and reduced innovation.” It also said that the deal would reduce or eliminate the discounts that both firms offer to distributors and would reduce Graco’s incentives to develop new products after the merger.

In March, the FTC withdrew its case, allowing the company to close the deal while the agency continued to review the acquisition; the withdrawal also opened the door to settlement discussions.

Graco is one of Minnesota’s 40-largest public companies based on revenue, which totaled $895.3 million in its most recently completed fiscal year.