The $1.7 billion sale of MTS Systems Corp., a maker of industrial sensors based in Eden Prairie, took a new twist this week as the acquiring firm announced a second deal that would put the biggest MTS business in the hands of another company.

The MTS test and simulation business, which accounts for about 60% of the company's approximately $830 million in annual revenue, will be sold to Illinois Tool Works Inc. after the acquisition of MTS by Amphenol Corp. closes this summer, the companies said this week.

Terms of the deal between Amphenol and Illinois Tools Works weren't disclosed.

The two transactions represent a major turning point for MTS Systems, which since 1959 has anchored an industrial area of Eden Prairie as a provider of tools and systems for manufacturers and the military to test materials and products against extreme temperatures, pressures and shocks.

When the coronavirus downturn hit last spring, shares in MTS were pummeled to their lowest level in 17 years. And the company's chief executive, Jeffrey Graves, resigned last June after eight years as its leader to pursue another opportunity. The board named one of its independent directors, Randy Martinez, a former aviation industry executive, as interim CEO while a search proceeded.

Martinez still had the interim title and MTS shares had climbed about halfway back to pre-pandemic levels when Amphenol last month offered to buy MTS for $58.50 a share, the approximate value of MTS in late 2019.

Executives at Amphenol, best known as a leading maker of coaxial cable and fiber optic connectors, portrayed their interest in MTS as chiefly to expand the Connecticut-based company's sensor and sensor-based products. The MTS sensor business produced revenue of $339 million last year and operates with a higher gross margin than the test and simulation business.

At the time the deal was announced last month, Amphenol said it would undertake a strategic review of the MTS test and simulation business, which MTS had taken steps to revalue, restructure and position for a deal earlier in the year.

In a statement this week, Adam Norwitt, Amphenol's chief executive, said the company reviewed a range of options before deciding to sell the test and simulation business to Illinois Tool Works.

"We determined that selling it to ITW, with ITW's complementary capabilities and strategic focus, is the best outcome for all parties," Norwitt said in the statement.

Illinois Tool Works, based in the Chicago suburb of Glenview, said the MTS test and simulation business complements its test, measurement and electronics business, which provides about 16% of its $14 billion in annual revenue.

MTS last month reported a net loss for its fiscal year ended Oct. 28 of $272 million, shaped chiefly by a one-time $292 million write-down of goodwill and long-lived assets taken in the last quarter.

Excluding the effect of the write-down and other one-time adjustments, MTS said it earned $39.3 million in the 2020 fiscal year, down 17% from $47.4 million a year earlier.

Evan Ramstad • 612-673-4241