Reuters) - Graco Inc (GGG.N), a maker of fluid-handling systems and components, will buy diversified U.S. manufacturer Illinois Tool Works Inc's (ITW.N) finishing businesses for $650 million in cash to increase its presence in international markets.
The businesses, which generated sales of $305 million in 2010, make equipment for industrial liquid finishing, powder coating and automotive refinishing, with significant operations in the United States, Switzerland, the United Kingdom, Japan, Brazil and Mexico.
Minneapolis-based Graco, which expects the deal to add to its cash immediately, plans to finance the transaction through a new committed $450 million revolving credit facility and previously announced long-term debt of $300 million.
"This acquisition is an excellent strategic fit with Graco's Industrial segment. It will advance all of our stated core growth strategies: new products and technology, geographic expansion, and new markets," Graco Chief Executive Pat McHale said in a statement.
The acquired businesses generate two thirds of revenue outside North America, increasing the company's critical mass in important international and emerging markets, he added.
Glenview, Illinois-based Illinois Tool Works said the sale is not expected to be complete until June 2011.
Illinois Tool Works expects to utilize after-tax proceeds from the sale to repurchase shares as part of its share repurchase program.
Graco shares rose 5 percent to $45.66 in after market trade, after closing at $43.27 on the New York Stock Exchange on Thursday.