W.W. Grainger, Inc. (GWW) completed its tender offer bid in Japan for 380,000 shares of MonotaRO Co., Ltd., a Japanese company, at a price of 1,010 yen ($11.11) per common share. With the completion of this transaction, Grainger has become a 53% majority owner of MonotaRO, a direct marketer of maintenance, repair and operating (MRO) supplies to businesses in Japan.
In June, Grainger first announced its plans to increase its stake in MonotaRO with an investment of approximately $4 million. MonotaRO started as a joint venture between Grainger and Sumitomo Corp. in 2000 to supply MRO products in Japan, the second largest industrial market in the world.
Grainger stated that it will consolidate MonotaRO’s results beginning with the balance sheet in the third quarter and the full income statement in the fourth quarter. The company expects this transaction to yield a one-time gain of 30 cents to 40 cents per share to its third quarter earnings.
This investment along with the acquisition of full ownership of Asia Pacific Brands India Private Limited, Grainger’s joint venture in India, reflect the company’s commitment to expand its presence in the global markets. Management believes that the acquisition of Asia Pacific Brands will provide Grainger a platform in one of the high potential MRO markets.
Despite the current economic conditions, Grainger is focused on increasing its market share through market expansion and product line expansion. Given the company’s strong balance sheet (cash and cash equivalents of $416 million) and the ability to generate positive cash flow (operating cash flow of $232 million in the first half), we believe Grainger has adequate financial flexibility to pursue additional growth opportunities.
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