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Industrial distributor, W.W. Grainger Inc. (GWW - Analyst Report) intends to buy European fastener distributor Fabory Group for $344 million to boost its product offerings. The acquisition is expected to close in the third quarter of 2011 and will be accretive to 2012 earnings.

Fabory, based in Netherlands, sells its 80,000 products in 14 countries. In fiscal 2010, it had total revenue of about $300 million.

Grainger expects to keep Fabory as a separate business, maintaining the Fabory brand. However, the companies are required to complete consultations with Works Councils representing Fabory employees in the Netherlands, Belgium and France before they can enter a definitive agreement.

Last month, Grainger posted adjusted earnings of $2.22 per share, comfortably exceeding the Zacks Consensus Estimate of $2.11 per share and $1.65 earned in the prior-year quarter. In its earnings conference call, the company raised its sales growth in the range of 9% to 10% compared with its prior guidance range of 7% to 10%. The company also guided 2011 earnings between $8.40 and $8.70 per share, up from its prior guidance of $8.10 to $8.60.

The Zacks Consensus Estimate for third-quarter 2011 is $2.33 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are $8.78 per share and $9.91 per share, respectively.

We maintain our Neutral recommendation on Grainger. The quantitative Zacks #2 Rank (short term Buy rating) on the stock indicates upward pressure on the shares over the near term.

Illinois-based Grainger is a leading North American distributor of material handling equipment including safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, etc. The company’s services comprise inventory management and energy efficiency solutions. The company competes with Applied Industrial Technologies Inc. (AIT - Snapshot Report) and WESCO International Inc. (WCC - Analyst Report).

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