Illinois Tool Works (ITW) has been going through quite the transformation over the past year or so after being egged on by activist investor Ralph Whitworth. The company sold a 51% stake in its decorative surfaces division last year and last week it announced that it was ‘exploring strategic alternatives’ for its industrial packing unit. This seems to fit with its strategy of unloading commodity-driven businesses which are below average profit-wise. The packaging unit ‘designs and manufactures steel, plastic, and paper products used for bundling, shipping, and protecting transported goods’ and generated $2.4b in revenues in 2012.
The strategic options being explored include both a spinoff to shareholders and a sale. A final decision shouldn’t be expected for awhile though as the review process ‘will last through the remainder of 2013’. Since the company has publicly announced this process, it is quite possible that potential buyers might reach out to ITW sooner.
Contrary to most recent strategic announcements, ITW was only up slightly on the news. Another victory for Mr. Whitworth’s Relational Investors who has been rather busy recently having pushed for spinoffs at L-3 (LLL), ITT (ITT) and more recently at Timken (TKR).
We will keep you updated as this situation progresses.
Disclosure: Author holds no position in any stock mentioned.
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