By RTT News,
February 06, 2014, 08:38:00 PM EDT
(RTTNews.com) - Private equity giant Carlyle Group LP ( CG ) said Thursday it has agreed to buy the Industrial Packaging Group unit from industrial equipment maker Illinois Tool Works, Inc. (ITW) for $3.2 billion. The transaction is expected to close in the middle of 2014.
Glenview, Illinois-based Industrial Packaging Group or IPG is a maker of strap, stretch, and protective packaging consumables, tools and equipment. The company has 88 manufacturing locations on six continents and serves 45 countries.
In late September 2013, Illinois Tool Works said its board authorized a plan to commence a sale process for the Industrial Packaging segment. The company had said earlier in February 2013 that it was reviewing strategic alternatives for the segment, which generated revenues of about $2.4 billion in 2012.
Commenting on the acquisition, Brian Bernasek, Managing Director of Carlyle Group, said, "IPG is a highly diversified business with strong management, attractive market positions and excellent free cash flow. We will leverage Carlyle's global network to support the Company's growth, and we look forward to helping IPG achieve its full potential as it transitions to a standalone company."
Carlyle said that equity for the transaction will come from Carlyle Partners VI, a $13 billion U.S. Buyout fund. Since inception, Carlyle has invested more than $9 billion of equity in industrial transactions around the globe.
In a separate statement, Illinois Tool Works said that the sale of IPG was part of its efforts to refocus its portfolio in conjunction with its Enterprise Strategy. In December 2012, the company provided details of its five-year enterprise strategy and said that key initiatives that would drive the enterprise performance goals were portfolio management, business structure simplification and strategic sourcing.
ITW will use proceeds from the sale to partially fund its plan to repurchase about 50 million shares by the end of 2014 in order to offset the earnings per share dilution in connection with the divestiture.
ITW has retained J.P. Morgan Securities LLC and Goldman, Sachs & Co. as its financial advisers, and Latham & Watkins LLP as its legal counsel in order to assist in the sale process.
Carlyle Group has secured committed debt financing from J.P. Morgan, Goldman Sachs, Bank of America Merrill Lynch, Barclays, Citigroup and Credit Suisse. Kirkland & Ellis is serving as legal advisor to Carlyle Group.
In mid-January, Carlyle Group said it agreed to acquire healthcare giant Johnson & Johnson's (JNJ) Ortho-Clinical Diagnostics business, a provider of solutions for screening, diagnosing, monitoring and confirming diseases, for $4.15 billion.
CG closed Thursday's regular trading session at $33.99, up $1.56 or 4.81 percent on a volume of 492,900 shares.
ITW closed the regular trading session at $78.12, up $0.53 or 0.68 percent on a volume of 2.70 million shares. In after-hours, the stock further gained $1.13 or 1.45 percent to $79.25.
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