On October 31, Industrial, tool-maker,
Illinois Tool Works Inc.
), announced completion of the divestment of 51% stake in its
Decorative Surfaces division to a fund managed by Clayton,
Dubilier & Rice, LLC (CD&R). The transaction was earlier
announced on August 16, 2012. The stock gained momentum and ended
1.75% higher than the previous day's closing price.
The transaction involved Wilsonart and related international
businesses which, following the divestment, will form a new
company named Wilsonart International Holdings, LLC. As agreed
upon, Illinois Tools will be getting roughly $1.05 billion in
cash and a 49% stake in Wilsonart International Holdings.
Cash proceeds from sales will be utilized majorly for
repurchasing common shares of the company.
The divestment will help Illinois Tool allocate free resources to
its core businesses and also earn from its stake in the laminate
business. Starting the fourth quarter 2012, the company's equity
interest (49%) in the decorative surfaces business will be
reported using equity method of accounting.
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.
The Zacks Consensus Estimate for the fourth quarter 2012 stand
at 92 cents, up 2.0% year over year. Estimates for 2012 and 2013
are at $4.10 and $4.41, representing year-over-year growth of
0.5% and 7.5%, respectively.
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Illinois Tool Works is one of the leading manufacturers of
industrial products and equipment operating through 800 business
units in 57 countries. We currently maintain a Neutral
recommendation on the company. The stock also bears a Zacks #3
Rank, implying a short-term Hold rating. Its prime competitor
Cooper Industries plc
General Electric Co.
Manitowoc Co. Inc.
) also bear Zacks #3 (Hold) Rank.