Illinois Tool Works Inc. (ITW:US), 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 (ITW:US) 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 (ITW:US) 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 (ITW:US) 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.
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