The Federal Trade Commission is challenging Graco’s proposed $650 million acquisition of ITW Finishing from Illinois Tool Works, claiming the proposed deal to combine the makers of equipment used to apply paints and other liquid finishes would hurt competition, lead to higher prices and reduce innovation for the North American manufacturers who rely on this equipment.
After a preliminary anti-trust investigation, the FTC issued an administrative complaint against Graco and ITW Finishing seeking to stop the deal. The FTC says it will file a separate complaint in federal district court in the District of Columbia seeking an order to halt the transaction temporarily, pending the FTC's administrative proceeding and any subsequent appeals.
The FTC says Graco and ITW already dominate markets for this equipment.
“Liquid finishing equipment is critical to manufacturers. Only three significant competitors sell and service it in North America, with Graco Inc. and ITW together dominating this field,” says Richard Feinstein, Director of the FTC's Bureau of Competition. “Combining competitors in these markets would be a bad deal for manufacturers and consumers, and would leave them facing higher prices and reduced innovation.”
The FTC charges that if the proposed acquisition were completed, the combined firm would control a dominant share of all North American sales of industrial liquid finishing equipment and have a monopoly specifically in the market for circulation pumps used in paint systems in the automobile industry.
Attorneys for ITW say the FTC has “overreached,” and it’s case is “flimsy.” Graco attorneys also challenged the FTC ruling, saying they have already agreed not to raise prices above inflation for the next three years.
“Graco strongly believes this transaction is pro-competitive," says Graco CEO Patrick McHale. “The liquid finishing industry is highly competitive with many serious, quality competitors in each product category.”