Illinois Tool Works Inc., a diversified global manufacturer, wants to become a little less diverse.
So the Glenview, Ill.-based company is moving ahead with plans to sell off its industrial packaging segment, a business that represents more than 10 percent of the company’s overall sales. ITW has been exploring options for months after commencing a review if the business in February.
With 2012 sales of $2.4 billion, ITW’s packaging business involves strap, stretch and protective consumables, tools and equipment used to bundle, ship and protect goods. Those packaging products are made from plastic, steel and paper.
Brands within the packaging segment include Signode, Strapex, Orgapack, Angleboard and Mima, the company said.
ITW will reclassify the business as a discontinued operation this quarter and expects to sell of the operations by the middle of next year.
“After carefully considering the underlying value of the business, the level of preliminary interest from potential buyers and a favorable debt market, the Company and our board of directors have opted to initiate a sale process for the Industrial Packaging segment,” CEO E. Scott Santi said in a statement.
“With this move, we are taking a sizeable step in the implementation of our strategy to narrow the focus of our portfolio,” he said.
ITW has approximately 800 businesses and posted sales of $18 billion in 2012. But the company has signaled an intention to sell off its commodity-based businesses that represent about a quarter of is portfolio.
Taking such a big chunk out of annual sales will influence earnings per share, ITW reported. To combat this impact, the company plans to repurchase about 50 million shares of stock between now and the end of next year. This will lower the overall share count and, as a result, boost EPS.
Current EPS guidance for the full year will fall by 13 to 15 cents during the third quarter and 51-55 cents per share for the entire year, ITW said. The company now expects EPS of 84-92 cents per share during the third quarter and $3.50 to $3.66 per share for the entire year.
The guidance change from July also includes a 9 cent per share drop related to a tax charge related to foreign earnings for both the quarter and the year, the company said.