Glenview-based Illinois Tool Works Inc. said it will divest 51 percent of its stake in its Decorative Surfaces segment, consisting of Wilsonart and related international businesses, to a fund managed by Clayton, Dubilier & Rice, LLC.
The business will become a new, independent company operating as Wilsonart International Holdings LLC, the company said in a release.
Through a combination of CD&R's equity investment of $395 million and borrowing by the new company, ITW will receive approximately $1.05 billion and retain a 49 percent equity interest in the business.
ITW acquired the Wilsonart, Resopal and Arborite brands were acquired in 1999. Located in North America, Europe and Asia, the Decorative Surfaces segment manufactures and distributes a variety of laminate and work surface products for the construction market including commercial, residential and renovation applications. Products include decorative laminate, solid surface, adhesives and custom edging. The segment had revenues of $1.1 billion and operating margins of 12 percent in 2011.
"The Decorative Surfaces segment has a variety of premium brands and is a valuable asset. The transaction with CD&R creates an opportunity for the business to fully leverage the depth and breadth of its decorative surfacing products and technologies as well as their unique design and full-service capabilities," said David B. Speer, ITW chairman and chief executive officer. "For ITW, the transaction will allow us to focus more resources on our core platforms as well as retain a share in the value of the business as global construction end markets improve over the coming years."
The transaction is expected to be completed in the fourth quarter of 2012, and will be subject to regulatory reviews.
"We believe this transaction creates a very strong foundation for Wilsonart to deliver continued industry-leading performance and are pleased to have ITW as our partner as we work with the Wilsonart management team to further build the value of the business," said CD&R Partner Nathan K. Sleeper.
Paul Pressler, a CD&R operating partner, will assume the role of interim chief executive officer of Wilsonart upon the close of the transaction.
"Wilsonart is extremely well-positioned for future growth," said Mr. Pressler. "We look forward to working with the management team to expand globally, invest in industry-leading innovation, service and distribution capabilities, and provide rewarding career opportunities for employees."
ITW intends to utilize a majority of after-tax transaction proceeds to repurchase shares to help offset associated earnings dilution.