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In a move to grow stronger in the manufacturing arena and boast metalworking experts, W.W. Grainger, Inc. (GWW - Free Report) acquired Mich-based E&R Industrial Sales, Inc. The latter is a distributor of metalworking, production supplies and MRO materials to manufacturers and industrial customers across the Midwest and Eastern United States. The deal will be accretive to earnings starting 2014.

E&R Industrial offers more than 100,000 products catering to 4,000 customers across the aerospace, automotive and general industrial sectors.  It has a workforce of more than 350, which includes metalworking specialists in field sales, inside sales and product management. In 2012, E&R Industrial generated sales of approximately $180 million.

The acquisition, effective immediately, will extend Grainger’s capabilities in serving customers in the manufacturing space. E&R Industrial's technical expertise and strong metalworking capabilities, along with Grainger's supply chain excellence, broad product offering, and inventory management acumen will enable customers save time and money by consolidating their MRO purchases with Grainger.

Grainger, which belongs to the industrial services industry along with ScanSource, Inc. (SCSC - Free Report) , HD Supply Holdings, Inc. (HDS - Free Report) and MSC Industrial Direct Co. Inc. (MSM - Free Report) , reported second-quarter 2013 earnings of $3.03 per share, up 15% from $2.63 a year ago and ahead of the Zacks Consensus Estimate of $2.96. Revenues in the quarter were $2,381 million, up 6% from $2,249 million in the year-ago period, but below the Zacks Consensus Estimate of $2,392 million. However, Grainger reported a 4% year-over-year increase in sales in Jul 2013, narrower than 5% increase in June and 11% growth in Jul 2012.

Grainger will continue to benefit from its focus on expanding its sales force, product offerings and strengthening its businesses across all operating regions, mainly in Asia and Latin America, as well as continued investment in e-commerce – its most profitable channel.

However, the recent slowdown in sales is a concern. Grainger plans to spend $150 million for growth initiatives in 2013. Even though these initiatives will lead to additional share gains in the future, it will weigh on margins in the short term.

Lake Forest, Ill.-based Grainger is a leading North American distributor of material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, forestry and agriculture equipment, building and home inspection supplies, vehicle and fleet components, and various aftermarket components.

Grainger currently retains a short-term Zacks Rank #3 (Hold).

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