Graco, Inc. (GGG) recently signed an agreement with Carlisle Companies Incorporated (CSL) to divest its liquid finishing business acquired from Illinois Tool Works Inc. (ITW) in 2012. The transaction value has been fixed at $590 million.
The divestment is in compliance with the order received from the U.S. Federal Trade Commission (FTC) on Oct 6. Back in Apr 2011, Graco had agreed to purchase Illinois Tool Works’ finishing businesses for $650 million in cash. The assets included Gema powder finishing equipment, Binks industrial pumping solutions, DeVilbiss auto refinish guns and accessories, Ransburg electrostatic guns and accessories, and BGK curing technology.
In Dec 2011, the FTC had filed litigation against this acquisition proposal on grounds of anti-competition, which was expected to occur from the infusion of liquid finishing business to Graco. However, per an agreement between Graco and the FTC, the latter allowed the acquisition to close in Apr 2012, provided that the liquid finishing businesses will not merge with Graco’s Powder Finishing and other businesses.
Presently, Graco will be selling Binks industrial pumping solutions, DeVilbiss auto refinish guns and accessories, Ransburg electrostatic guns and accessories and BGK curing technology. These businesses, acquired for $422 million, had generated revenues of $279 million in 2013.
The completion of the divestment, subject to regulatory approvals and customary closing conditions, is expected by first-quarter 2015.
The Zacks Consensus Estimate for Graco is pegged at 93 cents per share for third-quarter 2014, $3.66 for 2014 and $3.90 for 2015. The company is scheduled to release third-quarter results on Oct 22, after the market closes.
With a market capitalization of $4.3 billion, Graco currently carries a Zacks Rank #3 (Hold). The company faces stiff competition from The Middleby Corporation (MIDD), presently sporting a Zacks Rank #1 (Strong Buy).
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