Spray Foam Equipment Manufacturer's Latest Acquisition is Halted by FTC

WASHINGTON, DC – December 15, 2011 - The Federal Trade Commission has issued a complaint seeking to stop Graco Inc.’s proposed acquisition of rival Illinois Tool Works Inc.’s (ITW) finishing operations, saying the deal would hurt competition in markets for key industrial finishing equipment.

The proposed deal would lead to higher prices and reduced innovation for North American manufacturers who rely on this equipment, the FTC said. The commission alleges the combined firm would control a dominant share of the North American market for liquid finishing equipment and have a monopoly in the market for circulation pumps used in the automobile industry, if the proposed merger is completed.

The spray polyurethane foam industry knows of Graco through its acquisitions of Liquid Control, and Decker in the RIM Markets and Graco purchased both Gusmer Corporation and Glasscraft Inc several years ago to form the world’s largest spray foam equipment manufacturing group.

Graco said it strongly believes the proposed deal is pro-competitive. The company said it has proposed to the FTC that Graco and Illinois Tool's distributors would remain nonexclusive and would retain the ability to distribute products from other manufacturers.
"This transaction will benefit both end users and our distributor partners as we continue to invest in new products, customer service and manufacturing efficiencies," said Graco President and Chief Executive Patrick J. McHale. "It is unfortunate that the FTC has taken action which we believe, if successful, will hurt manufacturing and jobs in this country."

Graco and Illinois Tool manufacture industrial liquid finishing equipment, which is used to apply liquid finishes to manufactured products ranging from cars to wood cabinets.
The FTC said it would file a separate complaint in federal district court in the District of Columbia seeking an order to halt the transaction temporarily.

In April, Graco agreed to buy Illinois Tool's finishing operations for $650 million in cash, a deal that would help the fluid-handling company boost its presence in certain areas.