Global Fastener News

ITW to Return to Acquisitions in 2006

John Wolz

Editor’s Note: Articles in Media Spotlight are excerpts from publications or broadcasts which show the industry what the public is reading or hearing about fasteners and fastener companies.

Illinois Tools Works Inc. is using its cash to buy its own stock this year but “hopes to be back in the acquisition game in a bigger way next year,” according to reporter Bob Tita of Crain’s Chicago Business. “The stock purchase strategy is usually a last resort for companies that can’t find anything better to do with their money,” Tita wrote. “That boosts earnings per share by distributing income over a smaller number of shares.”
ITW is finding the market for takeovers “too pricey,” “Tita reported. “Competition from other potential buyers, including highly-leverage private-equity investors and hedge funds have “driven up the cost of small manufacturers.””

Due to slowing sales, especially in Europe, ITW lowered its 2005 profit goal. “That’s added further downward pressure to ITW’s stock, which has fallen 13% since January,” Tita pointed out. “Without a steady infusion of new revenue from acquisitions, ITW’s performance is likely to sputter,” Tita suggested.

Glenview, IL-based ITW operates about 650 companies which manufacture such products as fasteners, dishwashers and nail guns.
ITW began started accumulating cash after the manufacturing downturn beginning in 2001 that “soured the company’s appetite for additional purchases.”” As manufacturing improved, ITW spent nearly $600 million on acquisitions in 2004.

But higher interest rates should bring ITW back into the acquisition market. “The reason these people can bid the prices up is that money is so cheap,” Frank Mack of Conway MacKenzie & Dunleavy told Crain’s. “As long as the market is as liquid as it is, it’s going to be hard for companies like ITW.””
“Share repurchases are not part of our arsenal,” a company spokesperson told Crain’s. “We’d rather use our cash for acquisitions than stock buybacks.” �2005 FastenerNews.com