Zacks_Analysts' Blog : Graco Acquires ITW's Finishing Unit - Analyst Blog

Graco Inc. (GGG) has entered an agreement to acquire the finishing businesses of Illinois Tool Works Inc. (ITW) for $650 million.

The finishing unit of Illinois Tool Works manufactures and distributes equipment for industrial liquid finishing, powder coating and automotive refinishing, worldwide.

Employing professional management and 900 employees, the finishing businesses generated revenues of $305 million in fiscal 2010. The finishing businesses have operations in the United States, Switzerland, United Kingdom, Japan, Brazil and Mexico, which help the unit to generate 40% of revenues from the Americas and 60% from other places.

Consequently, Graco will also acquire the target business’ leading equipment technologies and brands including Gema, Ransburg, DeVilbiss, BGK and Binks.  

Graco will pay the acquisition amount through a $450 million revolving credit facility and long-term debt of $300 million. The transaction is expected to close in June 2011.

Management stated that the strategic acquisition will in due course expand its footprint internationally. With this acquisition, the company will acquire products complementary to its Industrial segment. Graco believes that the acquisition will create long-term value for the shareholders.

Going forward, Graco expects to build on momentum created in 2010, with the help of its growth strategies including product development, international expansion, entry into new markets and strategic acquisitions. The company will focus on expanding capital resources and share repurchase programs. Graco aims at a 10% long-term revenue growth and 12% long-term net earnings growth.

Headquartered in Minneapolis, Minnesota, Graco supplies technology for management of fluids in both industrial and commercial applications. Its products are used for the application of paints and coatings, for high-pressure cleaning of equipment, and the lubrication and maintenance of vehicles and other equipment.