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Private equity firm buys ITW industrial packaging business

By: Jim Johnson

February 6, 2014

Illinois Tool Works Inc. is selling off its global industrial packaging business, which represents a significant chunk of its annual sales, in a deal with a well-known private equity firm.

The move is part of a larger plan to narrow the company’s portfolio.

The Carlyle Group is paying in a $3.2 billion for the packaging assets that include 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.

Carlyle expects the transaction, subject to regulatory approval, to close by the middle of this year.

“IPG (Industrial Packaging Group) is a highly diversified business with strong management, attractive market positions and excellent free cash flow,” said Brian Bernasek, Carlyle managing director, in a press release. “We will leverage Carlyle’s global network to support the Company’s growth, and we look forward to helping IPG achieve its full potential as it transitions to a standalone company.”

Sales of the packaging business were $2.4 billion in 2012, ITW has said, and represent more than 10 percent of the firm’s annual revenue.

Cash from the sale will help with a stock buyback plan aimed at offsetting earnings per share dilution that will happen after the packaging business is sold. ITW, which wants to repurchase 50 million shares, had bought back 14 million as of the end of 2013.

ITW, when it announced plans to sell off the packaging operations in September, said the company wanted to narrow its portfolio, which included about 800 businesses.

The company cited interest from potential buyers as well as a favorable debt market in deciding to sell the industrial packaging segment.

Carlyle’s new business is based in Glenview, Ill., and has 88 manufacturing sites on six continents that serve 45 countries.

While this is certainly a big transaction, Carlyle Group is used to taking big swings. The company had $185 billion of asset under management as of Sept. 30.