Illinois Tool Works and Relational Investors announce cooperation agreement

After a series of talks, Illinois Tool Works (ITW) has agreed to give Relational Investors, the activist investment firm, an option to appoint its co-founder to ITW’s board of directors.

Based in San Diego, Relational Investors typically buys stocks in companies it wants a role in managing, including a seat on the board of directors. Proposals often include change in executive compensation salaries and a boost in shareholder values. 

Co-founder David Batchelder joined the Home Depot board in February 2007.

Relational began investing in ITW shares in mid-2011 and, as of the quarter ending Dec. 31, owned approximately 2.1% of ITW's common stock. The mutual cooperation agreement provides Relational with an option to appoint Batchelder to the ITW board of directors at Relational's request any time after ITW's 2012 annual meeting of stockholders but before the 60th day prior to ITW's 2013 annual meeting. Should Batchelder join the company's board, ITW agrees to re-nominate him at the company's 2013 annual stockholders meeting for a customary one-year term. During the term of the agreement, Relational has agreed to support the company's recommendations for nominees to the board.

"ITW and Relational have engaged in a series of productive discussions about our business and growth prospects," said David Speer, ITW's chairman and CEO. "We welcome open dialogue with and input from our shareholders and are pleased to have reached this agreement with Relational. Our board and management team remain committed to generating profitable growth and delivering strong returns, and we look forward to continuing to enhance value for all of our shareholders."

Based in Glenview, Ill., ITW’s businesses include construction, test and measurement tools, electronics, decorative surfaces, welding, automotive OEM and aftermarket, industrial packaging, food equipment, and polymers and fluids. ITW's revenues totaled $15.4 billion in 2010, with more than half of these revenues generated outside of the United States.

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