Summary
Illinois Tool Works Inc. (ITW) announced a significant strategic move on September 24, 2013, initiating a sale process for its Industrial Packaging segment. This segment generated approximately $2.4 billion in revenue in 2012, and the company plans to reclassify it as discontinued operations starting in the third quarter of 2013. The divestiture is expected to be completed by mid-2014. To mitigate the impact on earnings per share (EPS) from this divestiture, ITW intends to use a combination of sale proceeds, free operating cash flow, and additional leverage to fund a substantial share repurchase program. The company anticipates repurchasing approximately 50 million shares, aiming to offset any EPS dilution. This program is set to begin immediately and conclude by the end of 2014. Additionally, ITW will incur a $40 million discrete tax charge in the third quarter related to foreign earnings.
Key Highlights
- 1ITW is initiating a sale process for its Industrial Packaging segment, a business with $2.4 billion in 2012 revenues.
- 2The Industrial Packaging segment will be reclassified as discontinued operations in Q3 2013.
- 3The sale process for the Industrial Packaging segment is anticipated to conclude by mid-2014.
- 4ITW plans to repurchase approximately 50 million shares to offset EPS dilution from the divestiture.
- 5The share repurchase program will be funded through sale proceeds, free operating cash flow, and additional leverage.
- 6The share buyback program is scheduled to begin immediately and finish no later than the end of 2014.
- 7The company expects to incur a $40 million discrete tax charge in Q3 2013 related to foreign earnings.