Illinois to Exchange Notes

Zacks

Premier manufacturer of industrial products and equipment, Illinois Tool Works Inc. (ITW) recently declared an exchange offer of its unregistered old notes with new notes registered under the Securities Act of 1993.

Accordingly, the company’s outstanding 3.375% old notes due to mature in 2021 and 4.875% old notes due to mature in 2041 will be exchanged with a maximum of $350 million of its 3.375% new notes maturing in 2021 and maximum of $650 million of its 4.875% new notes with maturity due in 2041.

The new notes are completely identical with the old notes and they are not likely to bear any transfer restriction. Additionally, the exchange offer is valid till June 27, 2012.  The company holds the right to extend or terminate the date of the exchange offer as well as to withdraw the tender on or before June 27, 2012. 

The company’s earnings per share from continuing operations were 97 cents in first quarter of fiscal 2012, representing a year-over-year increase of 10.2%. Operating revenue in the first quarter increased 6.4% year over year to $4,547 million. The year–over-year increase in operating revenue symbolized continued improvement in end market demand.

The company pertains to an industry where ominous competition is prevalent. The company’s chief competitors include DXP Enterprises, Inc. (DXPE), Kadant Inc. (KAI) and METSO CP ADS (MXCYY).

The Zacks Consensus Estimate for the first quarter of fiscal 2012 and full year of fiscal 2012 are $1.11 and $4.25, respectively. Currently, the stock bears a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Additionally, we maintain a long-term ‘Neutral’ recommendation on the stock.

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