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Illinois Tool (ITW) to Buy MTS Systems' Test & Simulation Business

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Illinois Tool Works Inc. (ITW - Free Report) yesterday announced that it acquired the test & simulation business of Eden Prairie, MN-based MTS Systems Corporation (MTSC - Free Report) from Amphenol Corporation (APH - Free Report) . The financial terms of the transaction have not been disclosed.

It is worth mentioning here that Illinois Tool’s shares gained 0.8% yesterday, ending the trading session at $204.81.

Amphenol is a well-known name in the interconnect market. It manufactures and sells antennas, connectors/ interconnect systems (electronic, fiber optic and electrical), specialty cable, sensors and others.

It is headquartered in Wallingford, CT, and operates facilities in Africa, the Americas, Asia, Europe and Australia. Its products are used in multiple end markets, including mobile networks, industrial, data communications, automotive, commercial aerospace and broadband communications.

Inside the Headlines

Notably, MTS Systems’ test and simulation business accounted for 59% of the company’s revenues in fiscal 2020 (ended Oct 3, 2020). Through the business, the company offers software, hardware and services (including technical consulting, professional training and the management of product life cycle) to customers in various markets like universities, R&D institutes of government, aerospace, power generation, and oil and gas.

Illinois Tool believes that the aforementioned buyout will be a strategic fit to its Test & Measurement and Electronics segment. In addition to enhancing its product offering and technical abilities, the acquisition will help in expanding the company’s footprints in various end markets.

The Test & Measurement and Electronics segment of Illinois Tool engages in the production of consumables, equipment and related software required for testing and measuring materials and structures, and equipment and consumables used in the production of electronic subassemblies and microelectronics. Its products are used in consumer durables, general industrial, automotive and other end markets.

Completion of the acquisition is contingent upon the successful buyout of MTS Systems by Amphenol. Notably, Amphenol anticipates completing the buyout by mid-2021 after the receipt of regulatory and MTS System’s shareholders’ approvals as well as the satisfaction of customary closing conditions.

Zacks Rank, Estimates and Price Performance

With a $64.3-billion market capitalization, Illinois Tool currently carries a Zacks Rank #3 (Hold). It is poised to benefit from synergistic gains from acquired assets, a diversified business portfolio and improving end-market demand. However, uncertainties associated with the pandemic are concerning for the company.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, the company’s shares have gained 1% against the industry’s growth of 11.1%.




 

Meanwhile, the Zacks Consensus Estimate for its earnings is pegged at $1.81 for the first quarter of 2021 and $7.56 for 2021, reflecting a decline of 0.5% and growth of 1.3% from the respective 60-day-ago figures.

Another company from the same industry, Applied Industrial Technologies, Inc. (AIT - Free Report) , made an acquisition announcement this month. Notably, on Jan 5, Applied Industrial announced the acquisition of Gibson Engineering Company, Inc. The buyout is anticipated to strengthen and expand the company’s range of automation solutions across the U.S. Northeast and Mid-Atlantic markets.

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