Grainger speeds up stock buyback

W.W. Grainger, the Lake Forest-based maker of electrical equipment, power tools and pumps, entered into a $500 million accelerated share repurchase agreement with Goldman, Sachs & Co.

The buyback will lift earnings per share by 1 cent this year and by about 11 cents in 2008, Grainger said Monday in a statement. The exact number of shares to be bought back will be decided once the agreement is completed, which could take up to eight months.

Grainger said it has repurchased 56 million shares for about $2.5 billion since it began its program in 1984, and its shares outstanding have dropped 31 percent. Grainger won't make additional repurchases until the accelerated program is completed and said about half of the buyback will be funded with internal cash and the rest with short-term borrowings.

Stewart Scharf, an analyst with Standard & Poor's in New York, cut his rating on Grainger's stock last month to "hold" from "strong buy" because he said earnings per share growth was "camouflaged" by share buybacks.

Grainger said in July earnings for the year will be in the range of $4.75 to $4.90 a share, up from $4.70 to $4.85. For 2007, analysts estimate $4.85, and $5.52 for the following year.