Whitworth Target Illinois Tool Sees Up to $6 Billion Buyback

Illinois Tool Works Inc. (ITW), under pressure from investor Ralph Whitworth to increase profit, authorized a share buyback plan for as much as $6 billion in shares and boosted its dividend.

The repurchase program lets the Glenview, Illinois-based maker of auto parts and welding products buy back common stock over an open ended period of time, according to a statement today. The existing plan of $4 billion announced in May 2011 had about $1.2 billion remaining as of June 30.

Whitworth’s Relational Investors LLC took a stake in Illinois Tool last year and urged management to reduce the number of business units and cut costs. This year, Illinois Tool hired JPMorgan Chase & Co. and Goldman Sachs Group Inc. to study the possible sale of its industrial packaging unit.

Illinois Tool rose 0.8 percent to $74.30 at 1:51 p.m. in New York, reversing an earlier decline of as much as 1.2 percent. The shares advanced 21 percent this year through yesterday, compared with a 20 percent gain for the Standard & Poor’s 500 Index.

Yesterday’s closing price of $73.69 gave Illinois Tool a market value of about $33.3 billion, making the buyback reauthorization equivalent to roughly 18 percent of that figure.

The quarterly dividend was increased 10.5 percent to 42 cents per share, matching the average of analysts’ estimates compiled by Bloomberg, and will be paid on Oct. 8 to shareholders of record as of Sept. 30.

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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