Elmira, N.Y.-based Hardinge (NASDAQ:HDNG) is buying itself a new subsidiary.

On Thursday, Hardinge announced that it has agreed to buy the Forkhardt machine tools workholding devices subsidiary from Illinois Tool Works (NYSE:ITW) for $34 million.

Headquartered in Traverse City, Mich., Forkhardt has operations in the U.S., France, Germany, and Switzerland, and did $47 million in business in 2012. As such, Hardinge will be paying approximately 0.7 times annual sales for the company, a significant premium to the 0.5x sales valuation its own shares command. Illinois Tool, meanwhile, is selling the subsidiary for a steep discount to its own much higher 1.8-times-sales valuation.

Despite the premium being paid, Hardinge says this is a good deal for the company. CEO Richard L. Simons argues that buying Forkhardt will help it to "diversify our product offerings in workholding, accessories and spare parts as a means of reducing the impact of the highly cyclical nature of machine tool sales." Additionally, Simons noted that Forkhardt's wares are the kind that "tend to be more stable despite economic cycles and typically also have higher margins." Accordingly, Hardinge believes that, despite the high price, this purchase will be accretive to its earnings in 2013.

Hardinge shares declined in response to news of the acquisition yesterday, and are down a further 3.3% in Friday trading, currently at $13.89.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Illinois Tool Works. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.