ITW Divests Decorative Surfaces - Analyst Blog
November 01 2012 - 10:40AM
Zacks
On October 31, Industrial,
tool-maker, Illinois Tool Works Inc. (ITW),
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.
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 (CBE), General
Electric Co. (GE), and Manitowoc Co. Inc.
(MTW) also bear Zacks #3 (Hold) Rank.
COOPER INDS PLC (CBE): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
ILL TOOL WORKS (ITW): Free Stock Analysis Report
MANITOWOC INC (MTW): Free Stock Analysis Report
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