Graco, Inc.
(
GGG
) recently reached a consensus with the U.S. Federal Trade
Commission (
FTC
) for the closing of its $650 million
Illinois Tool Works Inc.
(
ITW
) finishing business acquisition. The acquisition is scheduled for
closing on April 2, 2012.
The FTC had filed litigation against this acquisition proposal
on December 15, 2011, on grounds of anti-competition which is
expected to occur from the infusion of Liquid Finishing business to
Graco. However, as per the recent agreement between the company and
FTC, the latter would allow the acquisition to close at the
stipulated time, provided that the Liquid Finishing businesses do
not conflate with Graco's Powder Finishing and other
businesses.
A final review is incipient at present by the FTC. Once this is
completed, a final order shall be given to Graco which would
formally identify the various businesses of ITW it would divest.
This process of identification would then need to be completed
within 180 days from the final decision issuance and order
date.
The ITW acquisition was first proposed on April 14, 2011, and
the acquisition is on the verge of completion almost after a year.
Graco plans to add a few equipment and technologies to its existing
product database from this acquisition. This includes Germa for its
Powder Finishing, Binks spray for its industrial liquid finishing,
DeVilbiss spray guns, Ransburg electrostatic devices and BGK curing
technologies along with its various accessories.
ITW has been posting strong financials for a while now. In 2011,
it's finishing businesses had sales of $375 million which was quite
impressive considering the clouded fiscal economy prevalent.
Graco's management is ebullient of this venture as it would largely
proliferate its distribution scenario in the end-markets, not to
mention the long-term technological advancement the company shall
enjoy along with the goodwill enhancement.
However, other players in the industry are also enthusiastic
about making strategic acquisitions.
Middleby Corporation
(
MIDD
) finished acquiring the assets of Turkington USA, primarily to
ameliorate its food processing platform. The company should remain
wary of other big players too such as
Manitex International Inc.
(
MNTX
) and
Atlas Copco AB
(
ATLKY
) in the industry.
We continue to maintain a Neutral recommendation on Graco. In
the short run, our view is supported by a Zacks #3 Rank on the
stock which translates into a short-term rating of Hold.
GRACO INC (
GGG
): Free Stock Analysis Report
ILL TOOL WORKS (
ITW
): Free Stock Analysis Report
MIDDLEBY CORP (
MIDD
): Free Stock Analysis Report
MANITEX INT INC (
MNTX
): Free Stock Analysis Report
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