(Updates with comment from Graco in the third and fourth
paragraphs and updates share price.)
The Federal Trade Commission has issued a complaint seeking to
stop Graco Inc.'s (GGG) proposed acquisition of rival Illinois Tool
Works Inc.'s (ITW) finishing operations, saying the deal would hurt
competition in markets for key industrial finishing equipment.
The proposed deal would lead to higher prices and reduced
innovation for North American manufacturers who rely on this
equipment, the FTC said. The commission alleges the combined firm
would control a dominant share of the North American market for
liquid finishing equipment and have a monopoly in the market for
circulation pumps used in the automobile industry, if the proposed
merger is completed.
Graco said it strongly believes the proposed deal is
pro-competitive. The company said it has proposed to the FTC that
Graco and Illinois Tool's distributors would remain nonexclusive
and would retain the ability to distribute products from other
manufacturers.
"This transaction will benefit both end users and our
distributor partners as we continue to invest in new products,
customer service and manufacturing efficiencies," said Graco
President and Chief Executive Patrick J. McHale. "It is unfortunate
that the FTC has taken action which we believe, if successful, will
hurt manufacturing and jobs in this country."
Graco and Illinois Tool manufacture industrial liquid finishing
equipment, which is used to apply liquid finishes to manufactured
products ranging from cars to wood cabinets.
The FTC said it will file a separate complaint in federal
district court in the District of Columbia seeking an order to halt
the transaction temporarily.
In April, Graco agreed to buy Illinois Tool's finishing
operations for $650 million in cash, a deal that would help the
fluid-handling company boost its presence in certain areas.
Shares of Graco closed 2.7% lower at $37.93 Thursday and were
unchanged after hours. Illinois Tool shares rose by a penny to
$45.76 in after-hours trading. Through the close, Graco's stock is
down 3.9% year-to-date and Illinois Tool's stock is down 14%
year-to-date.
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287;
nathalie.tadena@dowjones.com