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Graco Completes ITW Acquisition

Zacks Equity Research

As announced before, Graco Inc. (GGG) completed acquiring the finishing businesses of Illinois Tool Works Inc. (ITW) on Monday. Though the deal was closed at $650 million, Graco awaits a final settlement review from the U.S. Federal Trade Commission (FTC).

As declared at the time of announcing the acquisition, Graco added a few equipment and technologies to its existing product range from this acquisition. This included Germa for its Powder Finishing along with Binks spray, DeVilbiss spray guns, Ransburg electrostatic devices and BGK curing technologies with its various accessories for its Industrial Liquid Finishing,

On March 27, 2012, the FTC allowed the acquisition to close on the condition that the Liquid Finishing businesses do not conflate with Graco’s Powder Finishing and other businesses. Graco has complied with the FTC by limiting the conflation of the Liquid Finishing businesses of ITW, thereby making a provision for it to remain separately functional under the supervision of a trustee accountable to the FTC.

Whilst the company is taking proactive measures to ameliorate its revenues and profitability, it should take note that its competitors are also not sitting idle. Robbins & Myers, Inc. (RBN) last week reported its second quarter financial results of fiscal 2012, whereby revenues rose approximately 39% annually to reach a whopping $256 million. The company should remain wary of other big players too such as Barnes Group, Inc. (B) and Dxp Enterprises Inc. (DXPE) in the industry.

The current Zacks Consensus Estimates for Graco is$0.61 and $2.63 for the first quarter of 2012 and for fiscal 2012, respectively. The company currently retains a Zacks #3 Rank, which translates into a short-term ‘Sell’ rating. However, we maintain a long-term ‘Neutral’ recommendation on the stock.

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