Stanley Works, the parent company of Stanley Security Solutions, has agreed to buy Black & Decker Corp. (B&D) for about $3.5 billion, combining the two largest U.S. toolmakers in an all-stock transaction that is expected to reduce annual costs by $350 million.
Based on Stanley’s closing stock price, the offer values Towson, Md.-based B&D at $57.57 a share, or 22-percent above where it closed Monday.
Stanley and B&D, which have negotiated to merge several times in prior years, said they plan to expand profit margins through the transaction. The combined company will be called Stanley Black & Decker.
B&D stockholders will receive 1.275 Stanley shares for each share they own, New Britain, Conn.-based Stanley and B&D said in a joint statement. Stanley shareholders will own about 50.5 percent of the equity of the combined company and B&D shareholders will own the balance, according to the statement.
The enterprise value of the deal, which takes into account debt and cash on hand, is about $4.5 billion, according to the statement. The transaction is subject to approval by regulators and both companies’ shareholders.
Stanley Works’ brands include its Stanley tools line and FatMax, Bostitch and Mac Tools, which are used on cars. In addition to its familiar line of tools, B&D owns DeWalt, Porter-Cable, Kwikset and Baldwin brands.
Stanley Works made a huge splash in the security industry in late 2006 with its acquisition of HSM Electronic Protection Services for $545 million, which later would be renamed Stanley Convergent Security Solutions Inc. (Stanley CSS).
B&D has also made recent forays into the electronic security industry, including the introduction of residential access control solutions marketed under the Baldwin and Kwikset brands.
While the transaction will create the nation’s largest tool maker, it is expected to have little impact on Stanley’s electronic security endeavors, Les Gold, an industry analyst and partner in the Los Angeles-based law firm Mitchell, Silberberg & Knupp (MSK), tells SSI.
“As far as the security side of the business, the residential security lock business is likely of some interest to Stanley, although I do not believe that would have a material bearing on the acquisition. It does look like a good opportunity for Stanley,” Gold says.
The merging of the two companies is expected to trim costs by $350 million within three years, in part through job cuts, and grow earnings per share by $1 within three years, the companies said. Less than 10 percent of total positions at the combined company, or fewer than 4,000 jobs, will be cut. Most of the layoffs will be in corporate offices, as well as through purchasing, regional and business-unit consolidations and factory efficiencies, according to the statement.
Stanley Chairman and CEO John Lundgren will be president and CEO of the combined company, according to the statement. Nolan Archibald, 66, chairman and CEO of B&D, will be executive chairman of the combined company for three years.
The transaction is expected to close in the first half of next year.