Money Matters, Simplified.
Stanley to buy Black & Decker in $4.5B deal
by Jamie Anderson - November 3, 2009 - comments
If the deal between Stanley and Black & Decker sees the light of the day, the combined entity will have annual sales of $8.4 billion and about 40,000 employees
Connecticut, November 3 -- In what may be termed as a marriage among equals, the two largest U.S. toolmakers, Stanley Works (NYSE: SWK) and Black & Decker Corp (NYSE: BDK), have decided to join hands and get together.
Driven by the potential $350 million in annualized cost savings and a rebound in the housing sector, Stanley Works have agreed to buy Black & Decker for about $4.5 billion in an all-stock transaction.
The deal
Shareholders of Black & Decker will get 1.275 shares of Stanley, which closed at $57.56 Monday, for each Black & Decker share they own.
Black & Decker shares closed at $47.34 Monday. The deal thus represents a 22 percent premium for the shareholders of the acquired company.
In the new company, to be called Stanley Black & Decker, the Stanley shareholders will own about 50.5 percent while the Black & Decker shareholders will own the rest.
John Lundgren, the 58-year old chief executive officer of Stanley, will be president and CEO of the combined company. Black & Decker's Chief Executive, Nolan Archibald will be the chairman for a period of three years.
The transaction is likely to close in the first half of next year.
The logic
The deal represents combining of a top hand tool maker and a power tool maker. Black & Decker’s brands include DeWalt, Kwikset and Price Pfister, while Stanley’s brands include Bostitch, Proto, and Mac Tools.
"Our lines complement each other. From a product point of view and a geographic point of view we have an opportunity of putting these two organizations together and coming up with significant cost savings," Archibald said of the deal.
"With a billion dollars in cash flow, our combined business development team and a very full acquisition pipeline gives us the opportunity to continue to build the growth platforms that are out there," Lundgren said.
The deal represents a pioneering move in the tools industry and makes a lot of business sense since the housing market is showing signs of recovery and the raw-materials prices are also increasing.
The impending job cuts
Lundgren claimed that the cost savings in the combined entity would be derived from regional consolidation, corporate overhead cuts, as well as by incorporating changes in the manufacturing, distribution and purchasing practices.
He however did not rule out nominal job cuts, especially in the corporate staffs and areas like purchasing and warehouses.
"Certainly it will be less than ten percent - this is nothing draconian," Lundgren said of the impending job cuts.