The transaction is expected to close by the middle of this year. ITW said proceeds from the sale will be used to partially fund a buyback of 50 million shares this year.
ITW, a diversified manufacturer with businesses in automotive parts, kitchen appliances and other industries, has been shedding assets to reduce its overall portfolio by about 25%.
The company said last year it would explore a possible sale of its industrial packaging business, which generated revenue of about $2.4 billion in 2012. The unit provides material and equipment used in the shipping process.
CEO Scott Santi said the deal with private equity giant Carlyle Group marks the “last major step” in refocusing ITW’s portfolio.
“The Industrial Packaging business is a highly diversified, market leader,” said Brian Bernasek, managing director at Carlyle Group. “We are proud to partner with its strong management team and committed employees and look forward to supporting the company's growth initiatives.”
Carlyle Group was reportedly competing with Apollo Global Management (APO) and others for the industrial packaging business.
Shares of ITW were inactive in after-hours trading. The stock closed at $78.12, up 53 cents. Carlyle Group rallied 4.8% to $33.99 on Thursday.