Illinois Tool Works Inc.'s
) recently announced a major 51% divestment of its stake in its
Decorative Surfaces division to a fund managed by Clayton, Dubilier
& Rice, LLC (CD&R). The news was well received by the
market as the stock gained momentum after the announcement.
The transaction includes Wilsonart and related international
businesses, which post divestment, will form a new company named
Wilsonart International Holdings, LLC. Illinois Tools will be
getting roughly $1.09 billion in cash, comprising $395 million
raised through CD&R's equity investment and the rest through
borrowings, and a 49% stake in Wilsonart International
The divestment will help Illinois Tool allocate free resources
to its core businesses and also earn from its stake in the laminate
business. Completion of divestment is expected in the fourth
quarter 2012. Till the third quarter, the company's Decorative
Surfaces results will be reported as usual, while post the
completion of the transaction, equity interest in the same will be
accounted for using equity method.
Illinois Tool, for the time being, has reiterated its third
quarter earnings per share guidance of $1.03-$1.11. The Zacks
Consensus Estimate for the third quarter 2012 stand at $1.06, up
6.2% year over year. Estimates for 2012 and 2013 are at $4.12 and
$4.51, representing year-over-year growth of 0.94% and 9.57%,
Decorative Surfaces division produces decorative surfacing
material for furniture, office and retail space, countertops,
flooring and other applications. It mainly serves the commercial
construction (55%), renovation construction (30%) and residential
construction (14%) end markets. The division reported revenues of
$1.1 billion in 2011.
Illinois Tool Works is one of the leading manufacturers of
industrial products and equipment operating through 800 business
units in 57 countries. It competes with companies like
Cooper Industries plc
General Electric Co.
Manitowoc Co. Inc.
We currently maintain a Neutral recommendation on Illinois
Tools. The stock also bears a Zacks #4 Rank, implying a short-term
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