Graco is buying back $600 million of stock. Why borrow?

Graco has committed $600 million to an accelerated stock buyback, using cash and borrowing. The financing plan follows a year in which acquisitions, dividends and earlier share purchases have already used more cash than the equipment maker generated from operations.

The November 10 agreement with Bank of America calls for an upfront payment on November 11. Graco expects an initial delivery of about 6.9 million shares, with final settlement scheduled for March 2027. It estimates the overall repurchase represents roughly 5% of its outstanding stock.

The cash has already been put to work

Research by Ticker Byline shows that Graco's buybacks and dividends through September totaled about $608 million, compared with $416 million of operating cash left after capital spending. We combined the shareholder payments and compared them with the cash-flow statement.

The biggest purchase was Valco Melton, which Graco acquired on August 31 for about $462 million in cash before acquired cash and other cash-flow adjustments. It used both cash and its revolving credit facility, a bank line that lets it borrow and repay as needed.

Cash fell to $139.8 million at September 25 from $624.1 million at the end of 2025. Graco then had $668 million available under committed credit facilities. Those balances precede the new buyback; the company has not disclosed its exact split between cash and borrowing for the $600 million payment.

A cash-generating business, with competing uses

Graco makes equipment that moves, measures and sprays fluids and coatings. September-quarter sales rose 8% to $586.4 million. Half the percentage growth came from existing operations and half from acquisitions.

Adjusted net earnings increased 2% to $131.3 million. The measure removes acquisition costs, acquired-intangible amortization, changes in estimated acquisition payments and selected tax effects. Reported profit fell to $121.6 million from $137.6 million, partly because a gain from reducing estimated acquisition payments in the earlier year did not repeat.

Management's latest sales forecast calls for $610 million to $640 million in the fourth quarter. Chief Executive Officer Mark Sheahan says cash generation allows Graco to return money to shareholders while continuing to invest and pursue acquisitions.

The first share delivery is only part of the deal

The initial delivery represents about 80% of the payment divided by the November 10 closing share price. The final share count depends on average trading prices during the agreement, less a discount and subject to adjustments. The $600 million uses existing buyback authority, rather than adding a separate authorization.

Graco is bringing the share retirement forward while drawing on its balance sheet to fund it. The cash-flow history explains the borrowing: its operating inflow is substantial, but earlier payouts and an acquisition have already claimed much of it.

The Graco company profile tracks the repurchase, completed Valco Melton acquisition and cash position.