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Graco Settles with FTC

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Graco Inc. (GGG - Free Report)  announced that a proposed order regarding the sale of liquid finishing businesses has been filed for public comment by the Federal Trade Commission (FTC).

As per this order, Graco is required to sell the worldwide liquid finishing businesses that the company acquired from Illinois Tool Works (ITW - Free Report) on April 2, 2012.

Graco’s management was clearly disappointed with the order. The FTC will issue its final decision and order that will identify the products, businesses and/or assets that Graco must divest as and when the public comment period expires. The divestiture should be completed within 180 days following the issuance of the final decision and order.

As announced in April 2012, Graco completed its acquisition of the finishing businesses of Illinois Tool Works. Though the deal was closed at $650 million, Graco awaits a final settlement review from the U.S. FTC.

Meanwhile, Graco added a few equipment and technologies to its existing product range from this acquisition. This included Germa for its Powder Finishing along with Binks spray, DeVilbiss spray guns, Ransburg electrostatic devices and BGK curing technologies with its various accessories for its Industrial Liquid Finishing,

On March 27, 2012, the FTC allowed the acquisition to close on the condition that the Liquid Finishing businesses do not conflate with Graco’s Powder Finishing and other businesses. Graco settled the issue with the FTC by limiting the conflation of the Liquid Finishing businesses of ITW, thereby making a provision for it to remain separately functional under the supervision of a trustee accountable to the FTC.

Graco’s management is upbeat with the acquisition as it would largely proliferate its distribution scenario in the end markets along with powering the company with the long-term technological advancement.

We maintain our Neutral recommendation on Graco. In the short run, we have a Zacks #2 Rank on the stock, which translates into a short-term rating of Buy.

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