Illinois Tool Studies Sale, Spinoff of Industrial Packaging Unit

Illinois Tool Works Inc. is studying options including a sale or spinoff of its industrial packaging unit, which had revenue of about $2.4 billion last year, under a plan to boost profit by divesting commodity-tied businesses.

JPMorgan Chase & Co. and Goldman Sachs Group Inc. have been hired to assist in the review, which is expected to continue through this year, the Glenview, Illinois-based company said today in a statement. The unit makes steel, plastic and paper packaging used in transporting goods.

Illinois Tool, which had revenue of $17.9 billion in 2012, devised a strategy to sell less profitable businesses and consolidate units after Ralph Whitworth’s Relational Investors LLC took a stake last year and pushed for increased profit. Illinois Tool in October completed the $1.1 billion sale of a 51 percent stake in its decorative-surfaces division.

Relational began talks with management shortly after disclosing a holding in January 2012 that rose to 3.1 percent later in the year. The stake has been cut by 2.2 million shares to 12.3 million shares, or 2.7 percent, according to a Feb. 14 filing.

Illinois Tool rose 1.7 percent to $64.32 at 9:50 a.m. in New York. The shares had gained 4 percent this year through Feb. 15, as the Standard & Poor’s 500 Index climbed 6.6 percent.

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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