Illinois Tool Works Inc. (ITW) recently completed the acquisition of Shell SOPUS Products’ car care business, a leading automotive aftermarket consumer products portfolio, for an undisclosed amount.
The acquisition enhances Illinois Tool’scar care solutions business and will improve the vehicle owner’s windshield visibility, protecting and cleaning vehicles, and improving vehicle performance. SOPUS Products’ Car Care business includes brands such as Rain-X®, Black Magic® and Gumout®, among others.
In the fiscal year 2010, the company completed 24 acquisitions at a cost of roughly $531 million and acquired annualized revenue of $530 million. The company aims at achieving revenue of $800 million to $1 billion in the fiscal year 2011 through acquisitions.
Illinois Tool Works is one of the leading manufacturers of industrial products and equipment. We believe Illinois Tool stands at an advantageous position to grow in the quarters ahead as evident from the company’s promising EPS guidance of $3.60-$3.84, with mid-point up 23% year over year and the revenue growth expectation of 11.5%-14.5%.
It is anticipated that near-term results would be largely influenced by the strengthening end markets, restructuring benefits and share buybacks, offset partially by incremental international sales carrying lower margins compared with domestic sales. Over the medium to long term, prime driving catalysts will include a strong acquisition pipeline and recovery in economic conditions.
However, immense competitive pressure, especially from Cooper Industries plc (CBE), General Electric Co. (GE), and Manitowoc Co. Inc. (MTW), along with huge exposure to foreign currency puts the company in an unfavorable position.
We currently maintain a Neutral recommendation on the stock.
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