Illinois Tool Works Inc is nearing a deal to sell its industrial packaging unit for more than US$3 billion, with buyout firms Carlyle Group LP and Onex Corp competing in the final stretch of the auction, people familiar with the matter said.
The company narrowed the list of potential buyers to Carlyle and the consortium of Onex Corp and Canada Pension Plan Investment Board (CPPIB) after reviewing final offers submitted on Monday, and could strike a deal as soon as this week, the people said on Thursday.
Carlyle, which has a long track record of successfully carving out units from companies, is seen as the leading candidate to clinch the deal, according to one of the people. It could not be learned, however, if Illinois Tool Works has granted exclusivity to either bidder.
All the sources asked not to be identified because the matter is not public. Carlyle declined to comment while representatives for Illinois Tool Works, Onex and CPPIB did not immediately respond to requests for comment.
Illinois Tool Works announced in September it was initiating a process to sell the industrial packaging unit, as the conglomerate continues to streamline its diversified business lines.
The packaging business makes steel, plastic and paper products used for bundling, shipping and protecting transported goods, with brands including Signode, Strapex, Angleboard and Mima.
Seeking to avoid frothy auctions for companies as markets rallied, private equity firms have shown a strong appetite for large units being carved out of companies seeking to exit non-core businesses.
Those deals involve the creation of new companies and are complex. Firms with experience in executing corporate carve-outs feel they have an edge in such situations.
Last month, Carlyle said it would acquire a clinical diagnostics unit from Johnson & Johnson for US$4.15 billion.
This followed Carlyle’s acquisition in February 2013 of DuPont’s performance coatings business for US$4.9 billion, and its US$3.46 billion acquisition of United Technologies Corp‘s Hamilton Sundstrand industrial unit in 2012, along with buyout firm BC Partners Ltd.
By Greg Roumeliotis and Soyoung Kim
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