Spray equipment giant Graco will further expand its broad reach into the paint equipment market with the purchase of ITW’s group of finishing businesses.
Graco has agreed to pay $650 million in cash for the businesses, which manufacture and distribute equipment for industrial liquid finishing, powder coating and automotive refinishing.
ITW (Illinois Tool Works Inc.) is a century-old Fortune 200 global diversified industrial manufacturer; the finishing businesses have 900 employees and 2010 revenues of $305 million.
Graco, founded in 1926, is a global provider of fluid handling systems and components used in vehicle lubrication, commercial and industrial settings. The company’s revenues totaled $744 million in 2010.
Stock Climbs on ‘Big Deal’
The acquisition will give Minneapolis-based Graco “a leading position in industrial powder paint equipment—a growing global market where we have no offering today,” said Graco CEO Pat McHale.
McHale told the Minneapolis Star-Tribune that the sale was “a big deal for Graco.” He said his company had “knocked on ITW's doors for years and been rejected.”
Wall Street welcomed the deal with a 4 percent jump in Graco stock to $44.90 a share Friday morning, a day after the sale was announced. The company traded at $27 a share in September, the Star-Tribune reported.
“This acquisition is an excellent strategic fit with Graco's industrial segment,” McHale said. “It will advance all of our stated core growth strategies: new products and technology, geographic expansion, and new markets.”
New Markets, Name Brands
The acquired technologies will complement Graco's industrial offerings and give the company “a leading position in automotive refinish, where we have little presence,” McHale said.
Just as significant, he said, the new businesses generate 60 percent of their revenue outside North America, increasing Graco’s footprint in international and emerging markets.
The deal will also bring Graco a number of well-respected brands, including Gema powder finishing equipment, Binks industrial pumping solutions, DeVilbiss auto refinish guns and accessories, Ransburg electrostatic guns and accessories, and BGK curing technology.
|The deal will give Graco several well-known brands, including Gema powder finishing equipment.|
ITW revamped all of those brands except Gema
only last month, uniting them in a new unit called ITW Finishing Equipment Americas. The company said it was consolidating the units, which had their own operations and sales units, “to take advantage of the synergies between the four groups.”
The sale is expected to close in June at the earliest, pending regulatory reviews and other customary conditions.