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Is ITW's industrial packaging business worth $3 billion?

By: Don Loepp

November 25, 2013

We've known for a while that Illinois Tool Works Inc. was looking for a buyer for its industrial packaging business. Now we're getting a sense of how much the business is worth.

The Reuters news service reported today that "at least six" private equity firms are competing to buy the business, and that the deal could be valued at more than $3 billion.

The report quotes unnamed "people familiar with the matter," which typically means people in the investment banking community who may be exaggerating the potential purchase price.

On the other hand, Glenview, Ill.-based ITW has some major, well-known industrial packaging brands that could benefit from being out from under the umbrella of a company that has such diverse and widespread holdings that Plastics News has a long history of doing extra homework in order to include them in our various processor rankings.

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.

ITW also has a significant and long-held position in the plastics recycling market, which it first got into to generate feedstock for the Signode plastic strapping business.

So who's going to buy the industrial packaging business? The Reuters report ("ITW gets private equity bids for $3 billion-plus unit: sources") names Carlyle Group LP, Blackstone Group LP, Apollo Global Management LLC, Bain Capital LLC, Ares Management LLC and a consortium of Onex Corp. and the Canada Pension Plan Investment Board.

From my experience in watching these types of deals come together, I wouldn't put a lot of stock in the specific companies named in the report. They're all what we'd call likely suspects, but I wouldn't be surprised if there are others.

Anyway, given the timing of the story, I would not be surprised if ITW has some news to announce by the end of 2013.