Stanley Works Agrees To Buy Black & Decker For $4.5 Billion

Nov 03, 2009 (The Hartford Courant - McClatchy-Tribune Information Services via COMTEX) -- SWK | Quote | Chart | News | PowerRating -- The Stanley Works, one of Connecticut's marquee industrial companies, will buy Black & Decker Corp. in an all-stock deal worth about $4.5 billion, the companies said late today.

The new company will be called Stanley Black & Decker and will have its corporate headquarters in New Britain, Stanley's longtime home. John F. Lundgren, Stanley's current chairman and chief executive, will be president and CEO, and Stanley shareholders will own just over 50 percent of the new company.

One of the biggest domestic acquisitions by a Connecticut company this year, the deal brings together two famous national tool brands with combined revenues of $8.4 billion through the end of October and minimal product overlap. The merger is expected to close in the first half of 2010.

Stanley is smaller than Black & Decker by sales and both companies have been hard hit by the deep slump in housing and construction. But Stanley's growing security systems and services business -- now its largest division -- has given it the financial strength to pull off the deal.

"Joining these two companies together creates a powerful engine for growth, both as markets around the world recover and over the long-term," Lundgren said in a statement announcing the merger.

Founded in 1843, Stanley, one of Connecticut's oldest companies and an icon of the state's fading history as a manufacturing center, makes hand tools, heavy industrial tools and security equipment. It employs about 18,000 worldwide, including about 1,300 in New Britain and Farmington.

In recent years Stanley has focused on developing its electronic security equipment and services business that has grown as sales and profits from tape measures, screwdrivers and heavier industrial tools have fallen.

Stanley's 2008 sales were $4.5 billion.

Black & Decker, based in Towson, Maryland, which traces its roots to 1910, is best known for its power tools. It employs more than 22,000 worldwide and had revenues of $6.1 billion last year.

The companies portrayed the deal as a merger of similar but complementary companies. The companies said they expect to save $350 million within three years through cuts in corporate overhead and consolidation of some business units, including manufacturing, distribution and purchasing operations.

Lundgren told Bloomberg News that total job cuts would amount to less than 4,000, but Stanley spokesman Timothy Perra said it is too soon to know which work sites would take the losses.

"There is absolutely no determination at this stage of the game," Perra said.

Stanley has a tape-measure manufacturing plant in New Britain and operations of its commercial automatic door business in Farmington, in addition to several hundred corporate employees in New Britain.

Nick Heymann, an analyst in New York with brokerage Sterne, Agee & Leach, agreed with the companies that the companies' products generally complement each other and that the merger will allow for "significant cost reduction." He also said the deal would provide Stanley with more cash for dealing with maturing debt.

"What it doesn't do is reposition the combined companies into emerging markets," he said, noting that both companies have 85 percent or more of their sales in the U.S. and Europe.

The recession has been tough for Stanley, which reported third-quarter financial results on Oct. 21: Operating profits fell 14 percent from a year ago, to $135 million, on a sales drop of 16 percent, to $936 million.

Declines were especially steep for Stanley's industrial tools division, where profits fell 53 percent, to 19 million, on a 31 percent sales decline, to $205 million. Profits for the hand-tools division fell 11 percent, to $48 million, on a sales decline of 23 percent, to $328 million.

Stanley's security division, which provides a wide range of equipment and services, from manual locks to electronic access controls and monitors, was by far its best performer, with operating profits up 12 percent, to $84 million, on a 3 percent sales increase, to $403 million. That division benefited from acquisitions.

Stanley expects the merger to provide "greater resources to support continued expansion of our combined security and industrial businesses," Lundgren said in the statement.

As outlined, the terms of the deal call for Black & Decker shareholders to receive 1.27 Stanley shares for each Black & Decker share, or $57.56 at Monday's closing price -- a 22 percent premium over Black & Decker's closing price Monday, before the deal was announced. Shares were in the $57 range in after-hours trading.

Stanley shares closed at $47.34, up 12 cents on the New York Stock Exchange Monday.

The two companies' shares have recovered roughly equally since hitting bottom on March 9, when Stanley closed at $22.75 and Black & Decker, $20.35. But Stanley had fallen from highs just over $60 in 2007, while Black & Decker had been above $90.

The deal is a far cry from Stanley's battle in 1992, when Newell Co. attempted a hostile takeover of Stanley, which, then as now, was weakened by a housing and construction recession.

Civic leaders in New Britain received word of the merger as good news, although the local effects of the consolidation remain unstated.

Mayor Timothy Stewart called the merger "great" news for New Britain. "It's going to make them a stronger company," he said.

The merger has been approved by both companies' board of directors, but is subject to shareholder approval and regulatory review. The companies have scheduled a conference call for investment analysts for todayTues at 8:30 a.m.

Staff writer Christine Dempsey contributed to this story.

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