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 |  Nov-03-2009Black & Decker soars on Stanley Works deal(topic overview)
CONTENTS:
- In a joint statement, Stanley Works and Black & Decker jointly said they have entered into a definitive merger pact to create Stanley Black & Decker, an $8.4 billion global industrial leader, in an all-stock transaction valued at about $4.5 billion. (More...)
- Harvard's Joint Center for Housing Studies estimates that average spending on the do-it-yourself home improvement ' which is at the core of Black Decker's business will increase to $3,100 in 2015 from $2,500 in 2005. (Harvard adjusts the number for inflation). (More...)
- Black & Decker shareholders will hold a 49.5 percent stake after the all-stock deal is complete. (More...)
- Black & Decker's Chief Executive, Nolan Archibald will be the chairman for a period of three years. (More...)
- I like this because of the iconic nature of the two firms, and because they fit really well together. (More...)
- As the WSJ pointed out today, U.S companies are hoarding the highest levels of cash in past 40 years, to protect against another leg down in the economy. (More...)
- Adding to the pension jumps are arcane techniques that have received little scrutiny, including increases triggered when an executive reaches a certain age or when companies change interest rates used to calculate the pensions,''' the paper says. (More...)
- The combined company will retain corporate headquarters in New Britain, Conn., and the power tools headquarters remains in Towson. (More...)
- The worst news is "that the Wall Street seemed to like the deal". (More...)
- The merger will save about $350 million in costs over the next three years, the statement said. (More...)
- Despite sinking company share prices, executive pensions swelled last year, says the Wall Street Journal. (More...)
- If the shares can firm up, we see overhead resistance around the $50 price level. (More...)
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In a joint statement, Stanley Works and Black & Decker jointly said they have entered into a definitive merger pact to create Stanley Black & Decker, an $8.4 billion global industrial leader, in an all-stock transaction valued at about $4.5 billion. They said the driving motivation of the transaction is the $350 million in annual cost savings along with the enhanced financial strength. "This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform," Stanley Works Chairman and CEO John F Lundgren said. Under the terms of the transaction, Black & Decker shareholders would receive 1.27 shares of Stanley for each share of Black & Decker they own, representing a premium of 22.1 per cent to Black & Decker's share price as of October 30, 2009. [1] Stanley Works ( SWK ) and Black & Decker Corporation ( BDK ) have entered into a definitive merger agreement to create Stanley Black & Decker, an $8.4 billion global tool maker. The Board of Directors of both companies approved an all-stock transaction valued at approximately $4.5 billion. Under the terms of the deal, Black & Decker shareholders will receive 1.275 Stanley shares for each Black & Decker share they own.[2] On November 02, 2009 The Black & Decker Corporation (NYSE:BDK): and the Stanley Works (NYSE:SWK) announced that the Stanley Works (NYSE:SWK) and The Black & Decker Corporation (NYSE:BDK), have entered into a definitive merger agreement to create Stanley Black & Decker, an $8.4 billion global industrial leader in an all-stock transaction valued at approximately $4.5 billion. According to Black & Decker Corp both boards of directors have approved the transaction under which,, Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley common stock for each share of Black & Decker common stock they own. According to Black&Decker this represents an implied premium of 22.1% to Black & Decker'''s share price as of Friday, October 30, 2009.[3]
In a blockbuster deal, Stanley Works late yesterday announced a $4.5 billion all stock deal to acquire the Black & Decker Company, a move that will create one of the largest tool companies in the world. Under the terms of the deal, which has been approved by the boards of both companies, Black & Decker shareholders will receive 1.275 shares of Stanley common stock for each share of Black & Decker common stock they own. That represents a 22.1% premium to Black & Decker's closing price Friday.[4] Stanley Works (SWK) agreed to buy Black & Decker for $4.5 billion in stock, combining two household names in the market for tools. Both companies' boards have approved the deal, which will give Black & Decker shareholders 1.275 shares of Stanley for each share.[5]
On Monday afternoon, Stanley Works SWK announced that it will purchase fellow tool maker Black & Decker BDK in an all-stock transaction valued at around $4.5 billion. Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley common stock for each share of Black & Decker they own.[6] In a blockbuster of a deal, The Stanley Works ( ]] ) said late Monday that it will buy fellow toolmaker The Black & Decker Corporation ( ]] ) for $3.46 billion in stock. In pursuant to the deal, current Black & Decker shareholders will receive 1.275 Stanley shares, worth about $57.56, for each share of BDK they own. That price represents a 22% Premium over Black & Decker's Monday close of $47.34.[7]
Nolan D. Archibald, Black Decker's chairman and chief executive, said the deal would result in $350 million in cost savings. Under the terms of the transaction, which has been approved by the boards of both companies, Stanley would buy Black Decker for stock valued at about $3.5 billion and assume about $1 billion in debt. Shareholders of Black Decker would receive 1.275 common shares of Stanley for each Black Decker share they currently own. The companies said this price represented a premium of 22.1 percent over Black Decker'''s closing stock price on Friday, although that premium narrowed slightly to 21.6 percent by the end of Monday's regular trading.[8] By the third year, the deal will add $1 per share to the bottom line and will generate $1 billion a year in free cash flow. Announced after the close of regular trading yesterday, the deal caused Black & Decker's shares to shoot up to nearly $58 by 6 p.m. That represents about a 23% premium over the Baltimore-based company's closing share price of $47.34 in regular trading yesterday. Under the terms of the deal, Black & Decker shareholders will receive 1.275 shares of Stanley for each share they own of Black & Decker. That equates to a 22.1% premium to Black & Decker's Friday closing price of $47.22. "This looks like a really strong deal for both companies and ultimately demonstrates that they're positioning themselves ahead of renewed demand from the housing sector," Wall Street Strategies analyst Brian Sozzi told MarketWatch.com. "Make no mistake; the deal announced this evening is mostly about cost synergies long-term." Credit Suisse Group AG (NYSE: CS ) tripled its third-quarter earnings estimate for American International Group Inc. (NYSE: AIG ), citing gains in investments including derivatives and hedge-fund holdings Bloomberg News reported.[9]
Upon the closing, which is expected in the first half of 2010, Stanley shareholders will own about 50.5% of the equity of the combined firm and Black & Decker shareholders will down approximately 49.5%. We believe Stanley Works got a fair deal for Black & Decker, and were not planning on making material revisions to our fair value estimates for either company at this time. Based on our estimates, Stanley should earn a return close to its cost of capital if Black & Decker can generate operating profits around its historical averages by the end of our five-year forecast period. In our optimistic scenario, Stanley would reap a sizable return on its investment, assuming the combined company achieves the expected $350 million in cost synergies.[6] Will the purchase mean more jobs for Stanley Works in Central Connecticut? The specifics of the deal still are to be determined, but the initial announcement foresees $350 million in annual cost savings over time. It can be inferred that the some operations between the two companies will be combined, and that there will be some job losses globally. It's impossible to judge from the outside where the savings will take place. Will products still carry the Stanley label? Will Black and Decker remain a brand? Both companies have extremely strong images as providers of professional and consumer tools and accessories. Part of the reason for the combination is to leverage a number of high-visibility brands, such as Stanley, Bostitch and Best, along with Black & Decker's DeWalt, Kwikset and Baldwin. It would be counterproductive in most situations to rebrand strong labels.[10] Stanley Chief Executive Officer John Lundgren said that cost savings would come from business unit and regional consolidation, corporate overhead cuts, and changes to manufacturing, distribution and purchasing practices. He said job cuts would be modest. "Certainly it will be less than ten percent -- this is nothing draconian," Lundgren said in an interview. The CEOs said they do not expect antitrust problems. While the two companies are both top tool makers, Black & Decker is focused on power tools while Stanley Works is a top hand tool maker. Shares of Black & Decker, whose brands include its namesake line, DeWalt, Kwikset and Price Pfister, gained 18 percent in after-hours trading, while Stanley Works rose 4.1 percent.[11] Stanley, which is a leader in hand tools, owns brand names including FatMax, Bostitch and Mac Tools. Last month, Stanley raised its 2009 earnings outlook to $2.84 to $2.94 per share from its previous prediction of $2.34 to $2.84 per share. Black & Decker, known for its power tools, owns Kwikset, Baldwin and Price Pfister, among others. "Joining these two companies together creates a powerful engine for growth, both as markets around the world recover and over the long-term," said Stanley chief executive John Lundgren, in a statement.[12]
Stanley CEO John Lundgren said that the companies expect significant cost savings from the deal, but that job cuts would be "less than ten percent." Antitrust issues are not expected to arise in this acquisition, since Stanley focuses on hand tools, while Black & Decker makes power tools.[7] NEW YORK/BANGALORE, Nov 2 (Reuters) - Stanley Works ( SWK.N ) struck a deal to buy rival Black & Decker Corp ( BDK.N ) for $3.46 billion in stock, combining a top hand tool maker and power tool maker to benefit from higher margins and cost savings.[11] Tool maker Stanley Works ( SWK.N ) said it will buy rival Black & Decker Corp in a $3.46 billion stock deal that is expected to result in $350 million in annual cost savings.[13]
NEW YORK (Dow Jones)--Stanley Works (SWK) agreed to buy Black & Decker Corp. (BDK) for $4.5 billion in stock, in a deal that will enable the companies--household names in the U.S. tools industry--to cut costs and exert more influence on pricing. Both companies have felt the pressures of the recession, particularly given their close links with the housing industry. The companies expect the combination, which has been approved by both companies' boards, will result in savings of $350 million a year and to add to earnings by the third year.[14] Hand tool maker Stanley Works today said it will buy power tool manufacturer Black & Decker for $4.5 billion in all stock deal to create a combined entity that will help save $350 million annually.[1] The all-stock merger of The Stanley Works (NYSE:SWK) and Towson, MD-based The Black & Decker Corporation (NYSE:BDK), a global manufacturer and marketer of power tools and accessories, creating Stanley Black & Decker in a deal valued at approximately $4.5 billion, will move the combined company's corporate headquarters to New Britain, CT. The new $8.4 billion global industrial leader will keep its power tools headquarters in Towson, but the Baltimore Sun reports that as many as 250 corporate positions in Maryland will be lost.[15] A new hand and power tools company called Stanley Black & Decker will emerge in early 2010 from The Stanley Works acquisition of Black & Decker in a $4.5 billion all-stock deal.[16] The Fortune 500 power tool, hardware and home improvement company announced Monday that it is merging in a $4.5 billion all-stock deal to Stanley Works, based in Connecticut, to create Stanley Black & Decker.[17]
BANGALORE, Nov 3 (Reuters) - Tool maker Stanley Works ( SWK.N ), which is buying rival Black & Decker Corp ( BDK.N ) for $3.46 billion in stock, said the combined company is expected to earn about $5 per share in the third year after the close of the deal.[18] Stanley Works (SWK) expects its combination with Black & Decker Corp. (BDK) will cut pro forma earnings per share by $3 to $3.25 in the first year after the deal closes, based on generally accepted accounting principles.[19] The Stanley Works (NYSE: SWK ) late yesterday (Monday) announced a $4.5 billion deal to acquire Black & Decker Corp. (NYSE: BDK ) in an all-stock agreement aimed at creating a hand-tool and power-tool giant that will be able to benefit from a turnaround in the U.S. housing market. The deal was seen as a highly opportunistic one for both companies.[9] NEW YORK (CNNMoney.com) -- In a major consolidation of the tool industry, Stanley Works agreed to acquire Black & Decker in a $4.5 billion all-stock deal, the companies said Monday.[12] Stanley Works and Black & Decker announced Monday that the two companies would merge in an all stock deal estimated to be worth $4.5 billion.[20]
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. Shareholders of Black & Decker will get 1.275 shares of Stanley, which closed at $57.56 Monday, for each Black & Decker share they own.[21] "Our lines complement each other," Black & Decker Chief Executive Nolan Archibald said in an interview. "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." Black & Decker shareholders will receive 1.275 Stanley shares -- about $57.56 at Monday's close -- for each Black & Decker share they own, representing a premium of 22 percent over Black & Decker's Monday close of $47.34.[11]
Nolan D. Archibald, Black & Decker's chairman and chief executive officer, will be executive chairman for three years. The combined company will retain a presence in both Connecticut and Maryland, with its corporate headquarters in New Britain and the Power Tools headquarters remaining in Towson, Md. The transaction is subject to regulatory approvals and requires the approval of Stanley and Black & Decker shareholders.[10] "Stanley and Black & Decker together will have a comprehensive offering across all major tool categories and greater resources to support continued expansion of our combined security and industrial businesses," John F. Lundgren, Stanley's chairman and chief executive officer, said in a statement. Under the terms of the deal, which has been approved by the boards of both companies, Stanley would buy Black & Decker and Lundgren will become chief executive officer of the combined firm. "This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform," he said.[10] As per the deal, John Lundgren, Chairman and CEO of Stanley, will be president and CEO of the combined company, while Nolan Archibald, Black & Decker leader, will be the executive chairman for three years.[22] The deal combines the two biggest U.S. toolmakers, and will see Black & Decker's DeWalt power tools and Kwikset deadbolts being offered alongside Stanley's Mac wrenches and Best door locks. The companies said earlier talks had failed over who would be CEO of the joint company, but this has now been resolved, with Stanley's CEO John Lundgren set to take the post.[23] '''Black & Decker'''s position in power tools, security hardware products and. '' fasteners fits seamlessly with Stanley'''s product and service offerings. with no significant overlap in product lines,''' the company statement said. Young said the deal had been in the works for some time, adding, '''It took a while to reach an agreement, but both boards realized it was beneficial to both companies.'''[17] The combination would bring together two companies whose product lines appear to be complementary. Stanley is a diversified industrial company that sells hand tools and construction equipment, while Black Decker is known for its power tools.[8] Stanley, which makes hand tools, will pay a 22% premium, based on Friday'''s close, to purchase Black Decker'''s equally well known line of power tools. The companies said they planned to wring out about $350m in annual costs through the transaction, which they expect will add about $1 in per-share earnings within three years. This entry was posted by Gwen Robinson on Tuesday, November 3rd, 2009 at 4:55 and is filed under M&A, Capital markets.[24]
Stanley shareholders will own about 50.5% of the equity of the combined company, with Black & Decker shareholders owning the rest. The companies said they were 'totally swayed' by the potential savings from a merger, and estimate they can save $350m in costs.[23] When the merger is completed in the first half of 2010, Stanley shareholders will own approximately 50.5 percent of the equity of the combined company and Black & Decker shareholders will own approximately 49.5 percent, the release said.[4]
Upon the completion of the transaction, Stanley shareholders will own 50.5% of the combined company, while Black & Decker shareholders will own the remaining 49.5%.[2] Upon closing, which is expected in the first half of 2010, Stanley shareholders will own approximately 50.5% of the equity of the combined company and Black & Decker shareholders will own approximately 49.5%.[15] Under the terms of the agreement, Stanley shareholders will own about 50.5% of the combined company, which will be called Stanley Black & Decker.[25] According to the Associated Press, "Stanley shareholders will own about 50.5 percent of the combined company, which will be named named Stanley Black & Decker.[26]
According to an investigation by a law firm '''the transaction appears to be unfair''' to current investors of The Black & Decker Corporation (NYSE:BDK) because the '''offer to purchase The Black & Decker Corporation (BDK) appears opportunistically timed to take advantage of the current economic downturn'''. The investigation '''concerns whether the Black & Decker Board of Directors breach their fiduciary duties to The Black & Decker Corporation (BDK) shareholders by agreeing to sell the BDK at an unfair price thereby harming The Black & Decker Corporation and its shareholders''', '''whether the directors of The Black & Decker Corp. may have breached their fiduciary duties by not acting in BDK shareholders' best interests''', and '''the Company may not have adequately shopped itself around before entering into this transaction and, pursuant to this proposed transaction, the Stanley Works may be underpaying for Black & Decker Corporation, thus unlawfully harming BDK shareholders'''.[3] If you are currently an investor in shares of The Black & Decker Corporation (Public, NYSE:BDK), and purchased the shares before October 30, 2009, and / or have additional information relating to the investigation, you should contact the Shareholders Foundation, Inc. at: Email: mail@shareholdersfoundation.com or at: +1 (858) 779 - 1554 The investigation by a law firm focus on potential breaches of fiduciary duty and other violations of state law by the Board of Directors of The Black & Decker Corporation arising out of their attempt to sell Black & Decker Corp to Stanley Works.[3]
Under the terms of the deal, Black & Decker ( BDK, Fortune 500 ) shareholders will receive 1.275 shares of Stanley Works ( SWK ) common stock for each B&D share. That's a 22.1% premium to Black & Decker's closing share price on Friday.[12] Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley Common Stock for each share of Black & Decker common stock, about 22 percent over Black & Decker's closing stock price Friday. Lundgren said that joining these two companies together "creates a powerful engine for growth, both as markets around the world recover and over the long-term."[10]
Shareholders must also first back the proposal. Shares in Black & Decker rose 21% in after-hours trading in New York, while those in Stanley added 4%. The two firms estimate that joining forces will cut their combined costs by $350m, possibly including job cuts.[25] The premium amounts to about $615m over and above the market capitalisation of Black & Decker on Monday morning. This, too, is more than justified mathematically by the two companies' plans to cut some $350m of annual expenses as a result of the merger. Once taxed and discounted to reflect the time value of money, those synergies carry a net present value of about $1.9bn. Since Stanley Works shareholders will own 50.5pc of the enlarged group, their take amounts to $965m.[27] The best comments will appear alongside it in the print edition. The news that Black & Decker's merger with Stanley Works will result in the loss of yet another of the Baltimore area's Fortune 500 corporate headquarters is sure to set off another round of civic tooth-gnashing about why the city always seems to be on the losing end of these transactions. This deal is no occasion to bemoan Maryland's business climate or to compare ourselves to such supposed corporate havens as Dallas. For starters, this deal had nothing to do with Maryland and everything to do with what looks like a natural marriage between two big players in the same industry. Stanley effectively brought more money to the table, so it gets to keep its home turf. For another thing, the question shouldn't be whether Maryland is hanging on to these established companies but whether it is incubating the next generation of corporate giants.[28] Of course, there will be a loss of prestige for the Baltimore area when the headquarters leaves. "This is a company not with regional influence and reputation; this is a company with global influence and reputation. It has also been a company that has been as innovative as any company that this region has produced in recent memory," said Anirban Basu, chief executive of the Baltimore economic consulting firm Sage Policy Group Inc. "It is, generally speaking, a sad day for those who are stakeholders in the local business community," he added. "It may be a fine day for shareholders, but by and large this represents another in a long series of headquarters departures in the Baltimore area and Maryland, and stands to be one of the more painful headquarter losses in recent memory." After hearing the news Monday, Christian Johansson, secretary of the Maryland Department of Business and Economic Development, said he asked Black & Decker for help in connecting with Stanley officials. "The state of Maryland's chief concern is to make sure we are a strong partner in helping them work through the merger and make the case for keeping the employees they already have." Baltimore Sun reporter Laura Smitherman contributed to this article.[29] AP Nolan D. Archibald, chairman, president and chief executive officer of the Black & Decker Corp., and John F. Lundgren, chairman and chief executive officer of The Stanley Works, seal the merger with a handshake.[10]
Boise, Idaho (CaymanMama.com) Joining two giant toolmaking companies into one mammoth brand, Stanley Works has agreed to acquire Black & Decker Corp. for a price tag of $4.5 billion, the two companies announced Monday.[26] CHICAGO -- Toolmaker Stanley Works is buying rival Black & Decker Corp. for $4.5 billion, the two companies said Monday, uniting two of the industry's most iconic brands and creating what analysts said would be the largest U.S. toolmaker.[30]
NEW YORK — Stanley Works says it will buy Black & Decker Corp. for $4.5 billion, bringing together two major players in the toolmaking business.[31]
Two leading tool and equipment makers, Stanley Works and Black Decker, said Monday afternoon that they had agreed to merge in an all-stock transaction that they valued at about $4.5 billion.[8] Two of the sharpest brands in the toolbox are to merge in a bid to stave off the hammering they have taken at the hands of the US housebuilding recession. Stanley Works, the name behind the knife, is to merge in an all-share deal with its rival Black & Decker for $4.5 billion ('2.7 billion).[32] Stanley Works is acquiring Black & Decker for $4.5 billion in stock, The Wall Street Journal reports.[22] Tool giant Stanley Works has agreed to purchase Black and Decker for $3.5 billion in stock.[33]
Stanley Works has struck a deal to buy industry rival Black & Decker for $3.46bn in stock, bringing together the two tool-makers in a move which is expected to yield higher margins and cost savings.[34] Wall Street seemed to like the deal, as Black Decker's stock jumped more than 20 percent, to $57.10, in after-hours trading on Monday, while Stanley's shares rose 4 percent, to $47.[8] The gain in Stanley's stock raised the implied price for Black Decker's shares to $59.93, from $57.57 at the close of regular trading.[8]
Black & Decker shares jumped $10.91, or +23%, in premarket trading Tuesday, while Stanley works shares were up $2.11, or +4.7%.[7]
Stanley Works is to buy its power tools and DIY equipment rival Black & Decker for $4.5bn (£2.7bn), the two U.S. companies have announced.[25] The paper says, '''Now that the financial crisis has exposed flaws in the models central banks use, economists have launched into a flurry of activity that is likely to reshape the field.''' Two tool makers, Stanley Works (SWK), which is known for its hand tools, and Black & Decker (BDK), which is known for its power tools, have finally decided to merge after nearly 30 years of discussing the possibility.[35] ANNAPOLIS ' State officials say they will make the case to Black & Decker Corp. to keep jobs in Maryland as the tool maker merges with Stanley Works.[36] Stanley Works and Black & Decker Corp. agreed to a $4.5billion all-stock deal that combines two iconic U.S. hand-tool and power-tool makers whose fortunes have faded amid a collapse in the housing market and a broader industrial slowdown.[37] Hardware manufacturing giants Stanley Works and Black & Decker are set to merge in a $3.5bn deal, finding success on their fourth such attempt in 27 years.[23] The nation's largest toolmakers have discussed a merger three times over the past 27 years, according to Black and Decker's CEO. Stanley works' offer of over $57/share is 22% more than Black and Decker's closing price yesterday.[33] How many jobs might be lost in Jackson because of the merger between Stanley Works and Black & Decker will not be known until the first half of next year or later, according to a Black & Decker spokesman.[20] Stanley Works has about 18,000 employees worldwide, while Black & Decker employs about 20,000. The majority of the jobs lost in mergers of this type usually occur in the companies' main offices and sales forces, said Kenny Holt, an economist at Union University. "It will be the administrative positions and sales where the greatest amount of overlap occurs," he said, "(but) there could be product lines that could be eliminated."[20]
As two of the largest players in a fragmented tool market, Stanley Works and Black & Decker will combine a strong portfolio of brands across a number of products. Brands such as Bostitch (Stanley) and Black & Decker and DeWalt (Black & Decker) have considerable customer loyalty, especially among professional users. Although both firms compete in similar end markets, we dont see significant overlap among products.[6] Stanley produces'' hand tools for the construction, security, industrial and do-it-yourself markets. Its brand names include Stanley, FatMax, Bostitch, Facom, Proto, Mac Tools, Sonitrol, Stanley Security Solutions, Best, and Vidmar. In addition to its own brand of products, Black & Decker includes DeWalt, Porter-Cable, Emhart Teknologies, Kwikset, Baldwin, and Price Pfister. The deal now must be approved by shareholders of both firms and get cleared by regulators.[4] The deal holds a 22% premium for Black & Decker shareholders, who will own 49.5% of the company, while Stanley holders will have the rest.[37]
The new company will be named Stanley Black & Decker, according to a news release from Stanley. The merger still must be approved by shareholders of both companies and federal regulators.[20] The merger, announced Monday, creates a new company, Stanley Black & Decker, in an all-stock transaction valued at approximately $4.5 billion.[10] The new company, which will be called Stanley Black & Decker, sees $600 million in charges in the first year.[18] Deutsche Bank and Goldman, Sachs & Co. acted as Stanley's financial advisors and Cravath, Swaine & Moore LLP acted as Stanley's legal counsel. Black & Decker's financial advisor was J.P. Morgan Securities Inc. and its legal advisors were Hogan & Hartson LLP and Miles & Stockbridge P.C. Stanley Black & Decker: a primer on the deal STAFF REPORT How will this move affect Stanley's operations in New Britain? Since the new company will almost double in size, it is likely that the corporate headquarters also will grow in New Britain.[10] The deal is expected to close in early 2010, and the new company will be called Stanley Black & Decker.[12]
Now, Tibbels, like many others, is uncertain of the impact of a merger that would give Connecticut-based The Stanley Works control over the merged company. "You always assume the local presence is going to make a difference, but that's not always the case," he said. Many here were stunned by Monday's merger announcement, which would create Stanley Black & Decker, based in the city where Stanley now makes its home.[29] NEW BRITAIN -- The Stanley Works and Black & Decker have combined to create an $8.4 billion global diversified industrial leader.[10] NEW YORK (Reuters) - Shares of Black & Decker (BDK.N: Quote, Profile, Research ) gained 18.1 percent while Stanley Works (SWK.N: Quote, Profile, Research ) rose 0.8 percent after the bell on Monday after an announcement of plans to merge.[38] NEW YORK, Nov 2 (Reuters) - Moody's Investors Service said on Monday it may upgrade the ratings of Black & Decker Corp's ( BDK.N ) bond and commercial paper and cut the ratings of Stanley Works ( SWK.N ), due to Stanley's proposed acquisition of Black & Decker.[13]
Take the consideration. Stanley Works is issuing 1.275 of its shares for every Black & Decker share. That means not a single dollar of debt is added to the new combination.[27] Black & Decker shareholders will receive 1.275 shares of Stanley common stock for each Black & Decker share owned, according to a news release at stanleyworks.com.[20] The shareholders of Black & Decker will get 1.275 shares of Stanley for each share and Stanley shareholders will hold a majority stake in the combined company, at 50.5%.[22] Stanley shareholders will own about 50.5 per cent of the combined entity, while Black & Decker shareholders would hold the remaining stake of 49.5 per cent.[1] Stanley shareholders are to own around 50.5% of the enlarged company, which will be renamed Stanley Black & Decker.[32] Stanley Black & Decker will be 50.5 percent owned by Stanley shareholders and 49.5 percent owned by Black & Decker shareholders.[17]
The transaction is subject to customary regulatory approvals and closing conditions and requires the approval of Stanley and Black Decker shareholders.[8]
After paying the premium to Black & Decker shareholders, that's still some $350m, or $4.40 a share, of upside. If these two can integrate their businesses as neatly as they've engineered their deal, investors will happily stand back and admire their handiwork.[27] Black & Decker Chief Executive Officer Nolan Archibald says the deal's allure was the estimated $350 million in annual cost savings that can be extracted from the combined entity.[9] Prior to what is expected to be a major cost-cutting programme to shed $350 million of annual costs the two American companies employ 40,000 workers and have total revenues of $8.7 billion. 'This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform,' said Stanley chairman John Lundgren, who will be chief executive.[32] "The driving motivation of the transaction is the present value of the $350 million in annual cost synergies and the combined financial strength and product offerings of the merged companies," Archibald said in a statement. "This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform," said Stanley's Lundgren in a statement.[4] Archibald added, "While we are pleased with the initial premium of approximately 22 percent, the driving motivation of the transaction is the present value of the $350 million in annual cost synergies and the combined financial strength and product offerings of the merged companies," said Archibald. He called it "a one-of-a-kind opportunity to create outstanding benefits for our respective shareholders, customers and employees." Senior executives from both companies pointed out that there is no significant overlap in product lines, a continued strong presence in engineered fasteners and plumbing products, a broader geographic sales footprint and the $350 million in estimated annual cost savings from reductions in corporate overhead and regional consolidation.[10]
the companies have identified approximately $350 million in annual cost synergies. from reductions in corporate overhead, business unit and regional consolidation, manufacturing and distribution and purchasing. '''It is important to note that approximately 50 percent of those synergies are not related to people.[17]
The merger is expected to save about $350 million in costs over the next three years, according to a statement, from the consolidation of two global supply chain organizations into a "global low-cost sourcing unit." "Joining these two companies together creates a powerful engine for growth, both as markets around the world recover and over the long-term," says Stanley CEO John Lundgren, in a statement.[16] In North America, Europe and Asia, there are significant orgnaizational overlaps, Stanley Works CEO John Lundgren said. These overlaps, Lundgren said, will allow for consolidation along with the integration of large amounts of back office functions. These integrations will lead to about $135 million of synergies. Another $95 million of cost synergies will some from elimination of corporate overheads, Stanley said.[18]
Stanley chief executive officer, John Lundgren, said that cost savings would come through business unit and regional consolidation, overhead cuts, and changes to manufacturing practices. He also insisted that job cuts would be minimal. The companies expect to avoid the reported antitrust issues, stating that while they are both top tool-makers, they operate in different segments of the market.[34] Stanley Chairman John Lundgren will be president and chief executive of the combined entity after the all-stock deal is complete. "This looks like a really strong deal for both companies and ultimately demonstrates that they're positioning themselves ahead of renewed demand from the housing sector," Wall Street Strategies analyst Brian Sozzi said.[39] Stanley's chairman and chief executive John Lundgren said the all-share deal represented a "unique opportunity".[25]
John Lundgren, the 58-year old chief executive officer of Stanley, will be president and CEO of the combined company.[21] In addition to Lundgren, Archibald, and Loree, Stanley Vice President and Chief Financial Officer Donald Allan Jr. will be part of the executive team as senior vice president and chief financial officer of the combined company. Key members of both the Stanley and Black & Decker executive teams will hold positions in the combined organization.[10]
Did Stanley actually buy Black and Decker, or is it a merger of equals? Stanley stockholders will have a slightly more than half (50.5 percent, to be exact) of the equity of the combined company.[10] The combined company's board will include nine members of the current Stanley Board of Directors along with six members from Black & Decker's Board of Directors.[2]
The Connecticut manufacturer founded by Frederick Trent Stanley in 1843 will contribute nine of 15 board seats - and its chief executive. It is only right that Black & Decker's shareholders should receive something for ceding control.[27] The nine members of the current Stanley board also will outnumber the six additions coming from Black and Decker. When will the purchase close? Management expects to complete the deal in the first half of 2010, after regulatory approval and the approvals of both sets of stockholders. The acquisition has already been okayed by both companies' directors.[10] First off, Stanleys addition of Black & Deckers products will result in more exposure to big-box retailers, which tend to cater to the construction and do-it-yourself (CDIY) user. We find this a bit perplexing, since Stanleys strategy over the past few years has been to reduce this portion of its operations and instead focus on growing its security solutions and professional end-market businesses. We plan to further explore the timing of this deal. By purchasing Black & Decker, Stanley increases its leverage to residential construction and repair and remodeling activity, both of which continue to suffer from soft demand. We dont foresee a robust rebound over the near term, but Stanley could in effect be planning for an eventual strong recovery in these end markets.[6] There is little overlap in the companies' products, analysts said, with Stanley being a leader in hand tools and Black & Decker in power tools.[30] While Stanley is a supplier of quality tools and engineered solutions for industrial, construction and do-it-yourself use, and security solutions for commercial applications, Black & Decker manufactures quality power tools and accessories, hardware and home improvement products, and technology-based fastening systems.[2]
"If that is the case (with Black & Decker)," Gist said, "I can only hope that Jackson will receive a lot of additional employees." Another effect the merger may have on the local market is product pricing of Stanley Black & Decker tools, Holt said.[20]
"We will have global low-cost sourcing and manufacturing platforms, and a broader geographic sales footprint with additional opportunities in high-growth emerging markets," the Black & Decker CEO said. There will also be revenue synergies, the Stanley CEO said, adding they will be looking at cross-selling opportunities of products of both companies in existing mature markets.[18]
Stanley Works' $3.5bn purchase of rival Black & Decker leaves almost nothing for investors in the two companies to fret over.[27] Stanley Works has agreed to purchase Black Decker for $4.5bn in an all-stock tie-up uniting two big U.S. household brands.[24] Standard & Poor's late on Monday also took similar steps, puting Black & Decker's ratings on watch positive and Stanley Works' ratings on watch negative, suggesting it may take similar action as Moody's. Moody's also placed Stanley Works' A3 senior unsecured and the Baa1 junior subordinated debt under review for possible downgrade, saying the proposed transaction "will likely result in increased financial leverage and weakened interest and fixed charge coverage, as Black and Decker's debt, lease obligations, and pensions are assumed by Stanley along with its operating assets and cash flows."[13] Stanley Works announced Monday that it would buy Black & Decker to create the nation's largest tool maker.[36] 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.[21]
Fitch also rates Black & Decker Holdings LLC's (BDH) IDR and senior unsecured notes 'BBB'. Approximately $1.5 billion of SWK's debt and $1.7 billion of BDK's debt is covered by these actions. Upon completion of the transaction, which is anticipated in the first half of 2010, Fitch expects to rate the combined entity's long-term IDR 'A-', its Bank Facility and senior debt 'A-', and its junior subordinated debt 'BBB+'.[40] The New York Times reports that '''Stanley agreed to buy Black & Decker for about $3.5 billion in an all-stock transaction, creating a global tool maker worth about $8.4 billion.'''[35] Shares of Black & Decker, whose brands include DeWalt, Kwikset and Price Pfister, were up 26 percent at $59.55 in morning trade on the New York Stock Exchange. They earlier touched a year-high of $60.02.[18] Shares of The Black & Decker Corporation ( NYSE:BDK) traded on the day before the announcement at $47.34 per share and inclined on the news in after hours trading to $58.55 per share.[3] Black & Decker's shares were trading up more than 23% in pre-market trading Tuesday when news of the buyout reached investors.[41]
Black & Decker shares rose almost 20% in after-hours trading, while Stanley shares jumped 2.6%.[12]
Black & Decker's shares ended at $47.34, up 12 cents, Stanley's shares closed at $45.15, down 8 cents.[10]
The tool maker says about $350 million in annual costs will be cut through the all-stock buyout of Black & Decker.[41] The most attractive asset in Black Decker's tool box may not be the tools, but the company's cash supply. The company grew its cash supply to $800 million in the third quarter, up $564 million from the previous quarter, Deutsche Bank analyst Nishu Sood said in a recent research note.[42]
It's possible that Stanley wanted to scoop up Black Decker, the brand name tool company, because its sees some hope on the horizon for buzz saws and drills as the housing market improves.[42] Stanley is know primarily for hand tools, and a brand name that rivals only the vaunted " Sears Craftsman " line of tools for brand awareness at the retail level. Black & Decker is a major player in the power-tools market both for the "do-it-yourselfer" homeowner with its base-line Black & Decker brand, and for the construction industry with its trademark black-and-yellow " DeWalt " offering.[9]
Stanley, whose hand tools have been a ubiquitous presence in U.S. hardware stores for more than a century, will pay a 22 per cent premium, based on Friday's close, to purchase Black & Decker's equally well known line of drills, screwdrivers and other power tools.[43] Access and security solutions, including mechanical and electronic security products and systems and services as well as security monitoring systems are sold under the Stanley(r), Blick(r), Frisco Bay(r), PAC(r), ISR(tm), WanderGuard(r), HSM(r), and Sonitrol (r) brands. BDK, a leading global producer of power tools, power tool accessories, and residential security hardware, markets these products under such well-known brands as Black & Decker, DeWalt, Porter-Cable, Kwikset, and Baldwin.[40] The Black and Decker Corporation, located in Towson, MD, is a global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology-based fastening systems.[3]
The organization has benefited from Black & Decker's charitable contributions for years, as the manufacturer has donated power tools, employee volunteer hours and funding, Tibbels said.[29]
Black & Decker's power tools division will remain in Towson, but some corporate jobs will disappear.[29] Johansson says as the merger goes forward, the state will work to be a strong partner and make the case for the 1,300 jobs in Towson. He says company officials told the state that the bulk of the jobs in the power tools business will stay in Maryland, while the company's new corporate headquarters will be in New Britain, Conn.[36] With the state's stellar educational system and burgeoning high-tech industries, particularly centered around the biosciences, we have the opportunity to develop the titans of tomorrow -- provided we keep our focus on nurturing our intellectual capital. Certainly, the loss of jobs and philanthropy that goes with Black & Decker will be a blow, but if there's something to get upset about for the long term, it's not this merger but the news last week that the Department of Energy had awarded grants to 37 efforts to produce breakthroughs in renewable energy production -- none of them in Maryland. If there's news to be excited about, it's that Maryland researchers were awarded more than 400 National Institutes of Health grants to pursue their work under the federal stimulus program. Those are the kinds of developments that will determine how prosperous we are in the future.[28] The Baltimore area has seen corporate headquarters disappear before, but the loss of Black & Decker in a corporate merger could hurt more than most in terms of prestige, spinoff jobs and charitable giving, local leaders say. Allan Tibbels, co-executive director of Sandtown Habitat for Humanity, was left wondering what the proposed deal will mean for his nonprofit, which rebuilds housing in West Baltimore.[29] Few saw any positives for the community, even though part of Black & Decker will remain here. Cutting back on corporate functions here, such as back-office operations, will affect not only Black & Decker jobs but spinoff jobs in the community, in areas such as purchasing, marketing and legal services, said Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute. He expects Black & Decker's corporate giving and support to community groups and institutions to gradually decline, too. "They were a good corporate citizen, and one of the few corporate headquarters we have left," along with locally based companies such as McCormick, Legg Mason and T. Rowe Price Associates.[29]
Black & Decker'''s brands include DeWalt, Kwikset and Price Pfister, while Stanley'''s brands include Bostitch, Proto, and Mac Tools.[21] Black & Decker, which started around 1910, manufactures power tools and other equipment under the Black & Decker, DeWalt, Porter-Cable, Emhart Technologies and other brand names.[20]
Harvard's Joint Center for Housing Studies estimates that average spending on the do-it-yourself home improvement ' which is at the core of Black Decker's business will increase to $3,100 in 2015 from $2,500 in 2005. (Harvard adjusts the number for inflation). This may be a do-it-yourself deal, but the companies got some help from bankers. [42] During a conference call to discuss the $4.5 billion deal, Stanley's Chief Financial Officer Donald Allan Jr. said the combined companies.[19] The rating actions follow SWK's announcement of a definitive merger agreement with BDK. The all-stock transaction will create a combined company valued at approximately $4.5 billion.[40] In Fitch's view, the economy appears to be stabilizing, which should lead to improvement in margins on volume growth in BDK's businesses. Fitch also notes that there is integration risk but that SWK has demonstrated it can integrate acquisitions efficiently, having completed 56 of them since 2002 at a cost of $2.8 billion. While none were as big as BDK, both companies are in similar lines of business and are already knowledgeable about the go-to-market strategy on the CDIY (construction and do-it-yourself) side, which should help to minimize integration risk. It is expected that management of the merged company will remain prudent regarding its financial policies. On a combined basis, at year-end 2009, EBITDA/interest is forecasted at 5.6 times (x) and total debt with equity credit/EBITDA at 2.8x, both weaker than an 'A-' rating.[40] The combined company is expected to generate approximately $1.0 billion in free cash flow annually by the third year after closing, through significant improvements in working capital and asset efficiency. Both companies have recently suffered due to a drastic slowdown in construction markets and subsequent weakness in equipment demand. Now, with greater scale and efficiencies in its tool business, a highly diversified revenue base across geographies and business lines, and its strong financial position, the combined company will be in a better position to capitalize on market recovery.[2] For 2009, the combined company should generate more than $8 billion in revenues, have EBITDA near $1 billion, and operating margins close to 8%. These numbers do not include over $350 million of cost synergies already identified to occur over the next three years.[40] The combined company is expected to generate solid free cash flow once transaction and restructuring costs are absorbed, to have available cash balances near $1 billion, and increase available credit to at least $1.3 billion.[40] The combined company will have a comprehensive offering across all major tool categories. The companies anticipate significant cost synergies, operating margin expansion and enhanced growth opportunities through this transaction.[2]
James Loree, executive vice president and chief operating officer of Stanley, who will be EVP and COO of the combined company, called the transaction "a significant step in advancing each priority in the strategic framework Stanley has embraced since 2004. It builds strength in all of our business platforms."[10]
Stanley's chief executive officer told Reuters on Monday that the merger would reduce the combined companies workforce by less then 10 percent. That could be about 3,500 jobs worldwide if nine percent of the combine workforce was laid off.[20] Stanley Chairman John F. Lundgren will act as president and CEO of the combined corporation following the completion of the all-stock deal. The Board of Directors for each entity gave their approval for the merger, which will still receive regulatory and shareholder sanction.[26] Stanley CEO John Lundgren said 10% of the combined company's jobs will be cut, or about 4,000 workers.[41] Analysts said the deal also 'makes strong sense as the housing market resumes 'new normal' growth and raw-materials prices rebound'. They added that about 4,000 jobs, account for less than 10% the combined company's workforce, will also be cut.[23]
Once the deal is closed, Mr. Lundgren would become president and chief executive of the combined company.[8]
"If completed, the combined company will benefit from increased scale and product diversity, and will benefit from a stronger balance sheet than Black & Decker on a stand-alone basis," Moody's said in a statement.[13] Black & Decker has a different product line, adding it to Stanley's product line will greatly benefit Stanley. The fact that Stanley will keep its headquarters here is a real plus. Hopefully, they can bring some of Black & Decker's manufacturing here."[10]
The nine members of the current Stanley board of directors will be joined by six new members from Black & Decker's board.[4] Stanley employs an estimated 18,000 worldwide. In a joint statement, the companies said Stanley Black & Decker would retain a presence in both of the former companies''' current home bases.''[17] Among the companies whose shares are actively trading in the session are Black & Decker Corp. (BDK) and Avis Budget Group Inc. (CAR).[5] Black & Decker (DBK) closed Monday at $47.34 a share, up 12 cents, according to etrade.com.[20]
Management believes the deal will create added earnings power of $1.00 per share by the third year of the combined entitys existence. We think these cost savings will likely come from factory consolidations and head-count reductions and believe the firms estimate of earnings per share accretion assumes that end-market demand returns to normalized levels.[6] The companies said the driving motivation of the deal is the $350 million in annualized cost savings as well as the improved finances of the more diversified company.[18]
The combination is expected to be accretive to earnings by approximately $1.00 per share by the third year after closing. This includes approximately $350 million in estimated annual cost synergies fully realized within three years.[2] Gallagher expects AIG's derivatives unit, which brought the company to the brink of collapse last year with bets on home loans, to post a gain of about $2.5 billion. Hedge fund and private equity investments probably earned about $700 million in the quarter, he said. He rates the shares "underperform" and has said there may be little value for shareholders after the insurer repays its debts associated with a $182.3 billion government bailout.[9] The company is expected to generate some $1 billion in free cash flow annually by the third year after closing to be used to invest in shareholder value creation opportunities, including further investment in security solutions and engineered fastening.[10]
Black & Decker shareholders will hold a 49.5 percent stake after the all-stock deal is complete. [30] The company did not release the number of people who took that package, but in March, another 94 employes either took the voluntary severance package or were laid off from the company. That same month, Black & Decker cut managers' and some other employees' wages between 2.5 percent and 10 percent and also stopped making matching 401(k) contributions.[20] "Black & Decker has been a huge asset for Towson and a huge asset for the community. The civic work they do is off the charts. There are a lot of people who invest a lot of time in that company, and those families make up the core of this district."[29] We would remain on the sidelines for now. The Black & Decker Corporation ( BDK ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.[7] The Towson-based Black & Decker Corporation would be celebrating its 100th anniversary in 2010, but on Monday a guy named Stanley crashed the party.[17] Black & Decker Corporation was founded in 1910 by Duncan Black and Alonzo Decker as a small machine shop in Baltimore.[17]
Black & Decker's Chief Executive, Nolan Archibald will be the chairman for a period of three years. [21] The increased resources will be used to invest in security solutions, engineered fasteners and other high-growth platforms, Black & Decker Chief Executive Nolan Archibald said on a conference call with analysts.[18] 'Our lines complement each other,' Black & Decker chief executive Nolan Archibald told Reuters.[34]
I like this because of the iconic nature of the two firms, and because they fit really well together. I hope they keep their respective brands in the right places: it's hard to imagine buying a Stanley drill, or Black and Decker door hardware or hammers. [8] Black and Decker like the plague and will have to think twice about Stanley in the future.[8]
For the past four summers, company workers have helped with weeklong summer building projects in the neighborhood. The nonprofit has rebuilt 275 homes, and "every single house we touched since 1992, we've used DeWalt or Black & Decker equipment," he said Monday. "They've been such a blessing to our city neighborhood for almost 20 years."[29] The effect of the merger on Jackson's Black & Decker workers may not be as great as feared.[20]
The price is a 22 percent premium of Black & Decker's Friday's closing price.[20] Some corporate operations are expected to stay at Black and Decker's current headquarters in Towson, Md., however.[10] Christian Johansson, the head of Maryland's Department of Business and Economic Development, says state officials spoke with Black & Decker representatives on Monday.[36]
As the WSJ pointed out today, U.S companies are hoarding the highest levels of cash in past 40 years, to protect against another leg down in the economy. Stanley Works may be able to increase its own cash cushion as it rides out the uncertain times. The combined balance sheets of the two companies will help them weather to storm until a housing recovery can take root. A similar cash-hoarding strategy prompted home builders Pulte Homes Inc. and Centex Corp. to combine forces in April. [42] The Stanley Works of today may be a different company than it was 50 years ago. One constant is its ability to evolve through innovation and bold decision making -- not only here in New Britain, but around the world."[10] Stanley Works is a worldwide supplier of quality tools and engineered solutions for industrial, construction and do-it-yourself use that was founded in New Britain in 1843.[10] Stanley Works brands include the Stanley line, Bostitch, Proto, and Mac Tools.[11]
Stanley Works (SWK) finished Monday's trading day at $45.15, down 8 cents.[20]
We have avoided shares of SWK since our early June coverage began last year, when the stock was trading at 47.44.[7] Shares of Research In Motion Ltd. (NASDAQ: RIMM ), maker of the BlackBerry smart phone, fell in trading yesterday (Monday) after Citi Investment Research analyst Jim Suva told investors to sell the stock because of mounting competition from other smart phone makers. " Simply put, there is an invasion of new phones, applications, and competition," Suva wrote in a note to clients. He cut his rating to "sell" from "buy." He cited the launch of a Motorola smart phone running on Google Inc.' s (Nasdaq: GOOG ) Android operating system as being among the key competitive threats, Reuters reported.[9]
Adding to the pension jumps are arcane techniques that have received little scrutiny, including increases triggered when an executive reaches a certain age or when companies change interest rates used to calculate the pensions,''' the paper says. The Federal Trade Commission is taking action against the company behind the credit monitoring service freecreditreport.com for its misleading commercials, the New York Times reports. The paper says that the FTC believes the company is '''deliberately diverting people from a government-mandated site where consumers can get free credit reports by law, and using the reports as a lure for a $14.95 monthly service that alerts subscribers to important changes in their credit status.''' The government has, in what the Times calls an '''unusual salvo,''' created its own commercials mocking the service and prescribing caution. Here'''s an excerpted verse: '''Other sites may turn your head; they say they'''re free; don'''t be misled. Once you'''re in their tangled web, they'''ll sell you something else instead.''' [35] The new company will begin with annual sales of $8.4 billion, according to company officials. Officials said they expect the deal to be finalized in the first quarter of 2010. '''I know this news is unexpected, and I certainly appreciate that it will cause uncertainty about what this means for many of you.[17] The companies estimated annual savings in the region of $350m, with improved finances and a more diversified company said to be major drivers behind the deal.[34]
The Treasury Department has concluded that the deal would likely be a wash, with Goldman Sachs saving on taxes whatever it pays Fannie Mae. Treasury officials have said they wouldn't let a deal move forward unless taxpayers were advantaged. WASHINGTON -- The government's "pay czar" expects compensation plans for additional employees at the seven companies getting the biggest bailouts to be in place by year's end, while the Federal Reserve will soon start its own work on banks' pay practices.[30]
Stanley is the smaller company, based on sales and employees, but will be the acquirer in the deal, which comes amid a slow period in deal making.[37]
Stanley shareholders will own around 50.5% of the newly-combined company, with BDK shareholders owning the remaining portion.[7] The deal thus represents a 22 percent premium for the shareholders of the acquired company.[21] The boards of directors for each company approved the deal, which requires regulatory and shareholder approval.[39]
The combined company will retain corporate headquarters in New Britain, Conn., and the power tools headquarters remains in Towson. [16] The combined company's corporate headquarters will remain in Connecticut, and its power tool division will stay in Maryland.[30]
The corporate headquarters will be in New Britain, Conn., while the company'''s power tools headquarters will be in Towson.[17] The new company will also become an important supplier to retailers for both hand and power tools, provide considerable operating leverage, and generate significant free cash flow.[40]
The company, however, would still have to compete with Hitachi, Bosch, Skill and other power tool brands for market share.[20] In January 2005, the company laid off 300 hourly and 50 salaried employees after relocating Porter-Cable's portable power tools assembly division and its reconditioning unit on Phillips Road in Jackson to Reynosa, Mexico, and McAllen, Texas. At that time, the two local plants still employed around 1,300. In February 2009, the company offered a voluntary severance package to all hourly workers in its South Jackson plant.[20]
"Stanley is more of a hand tool manufacturer," said Roger Young, vice president, Investor & Media Relations for B&D, "and we are in power tools. They are fairly complementary."[20] The transaction, which combines a top hand tool maker and a power tool maker, will really start to add to earnings from the second year.[18] The deal represents combining of a top hand tool maker and a power tool maker.[21]
The worst news is "that the Wall Street seemed to like the deal". This will surely mean a plethora of job losses (usually coded as'synergies') in order to justify the price paid. [8] Then that's just what Wall Street does like, trading jobs forstock price and taking out hefty fees along the way. Neither of these companies needs the other to continue to prosper; both certainly have access to all the capital and labor necessary to compete in their respective markets as well as owning outstanding and highly respected brand names.[8]
In a story in the Wall Street Journal, Lundgren acknowledged the merger would likely mean thousands of job cuts, especially in the corporate staffs and areas like purchasing and warehouses that serve the same region. He said he hoped the job cuts would total fewer than 4,000.[4] 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.[21]
The merger will save about $350 million in costs over the next three years, the statement said. [12] Bank of America Corp. (NYSE: BAC ) is preparing to pay back approximately $20 billion it borrowed from the government’s Troubled Asset Relief Program opnbrktTARPclsbrkt, according to investment bankers who spoke to The New York Post. The Charlotte, NC-based bank received the money from the government to help complete its merger with Merrill Lynch & Co. last December.[9]
In a $4.5 billion stock transaction, two of the industry's biggest names consolidate.[12] Savvy and experienced investors don't need nor want clever mergers to achieve diversification. They can buy the stock of each in the proportion appropriate for their portfolio goals and achieve the diversification they feel appropriate. This option is now not available to them. Ah, but then there were all those sweet transaction fees and that quick premium score and jobs are just synergies to be captured.[8] Jackson Mayor Jerry Gist said Monday that the merger could benefit Jackson if Stanley closes a plant in another city and moves the work to Jackson. "I have seen particular divisions phased out in other sites," Gist said, "and they are done at another plant or location and that could be good for a city or it can be bad." One example occurred in June when Fortis Plastics announced it would add 50 jobs to the Jackson market after consolidating its Mississippi plant with its local Bonwood Drive location.[20]
"Stanley Works is a company worthy of admiration," Millerick said. "Its management continually seeks out new opportunities and challenges.[10]
Despite sinking company share prices, executive pensions swelled last year, says the Wall Street Journal. [35] The merger could give the company product pricing power over those stocking its brands. "Which means Lowes, and Home Depot, Wal-Mart and Sears and all those that buy the product could be facing higher prices for the product," he said, "and either pass those higher prices on to consumers or take less of a profit on their sales."[20] The company has a 2.92% dividend yield, based on last night'''s closing stock price of $45.15.[7]
The combined company's business risk will increase as more revenues are dependent on cyclical industries and recurring security revenue becomes a smaller percentage of combined revenues. Both companies are cyclical, but BDK, having a good correlation to residential housing (primarily repair/remodeling) markets and the consumer sector, tends to come out of recessions earlier than SWK's more industrial/commercial focus. BDK's revenues and, in particular, its margins have tended to bounce back relatively quickly after recessions.[40] If anything the combined company should shed the duplicative fat and bolt on some companies than can help the combined entity battle other companies that have dominant market positions in the same space like Hilti and ITW. There is still room for growth of Dewalt especially in the hammer and fastening side but ITW has been left alone to dominate the retailers through Lowes and Depot and Hilti has no real "system" competition at the jobsite. Both these competitors represent real opportunities in the here and now.[42]
If the shares can firm up, we see overhead resistance around the $50 price level. [7] Greylock Partners -- which has backed Facebook, LinkedIn and several Austin-based startups -- said Monday that it has put together a new $575 million fund, one of the biggest to be created in the past year, and hired a new partner, Reid Hoffman, the founder of LinkedIn and an active investor in early stage startups.[30] Deal Journal is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles.[42] Deal Journal is an up-to-the-minute take on the deals and deal makers that shape the landscape of Wall Street, including mergers and acquisitions, capital-raising, private equity and bankruptcy.[42]
"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.[21] 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.[21]
SOURCES
1. Stanley Works to buy Black & Decker for $4.5 bn
2. Stanley's $4.5B Black & Decker Acquisition -- Seeking Alpha
3. The Black & Decker Corporation board of directors under investigation
4. Stanley Works to buy Black & Decker for $4.5 billion - 2009-11-03 08:20:44 EST | Industrial Distribution
5. US HOT STOCKS: Black & Decker, Avis Budget Group Up After-Hours - WSJ.com
6. First Thoughts on Stanley Black & Decker - Morningstar Stock Analyst Notes
7. Dividend Stocks The Dividend Daily » Blog Archive » Stanley Works to Buy Black & Decker in $3.46 Billion Deal (SWK, BDK)
8. Stanley Works to Acquire Black Decker - DealBook Blog - NYTimes.com
9. Investment News Briefs
10. Stanley works out deal - The New Britain Herald News : New Britain, Conn., and surrounding areas (newbritainherald.com)
11. UPDATE 4-Stanley Works to buy Black & Decker for $3.46 bln | Reuters
12. Stanley Works to acquire Black & Decker in stock deal - Nov. 2, 2009
13. UPDATE 1-Black & Decker ratings on review for upgrade-Moody's | Reuters
14. 3rd UPDATE:Stanley Works To Buy Black & Decker For $4.5B In Stk - WSJ.com
15. Black & Decker, The Stanley Works $4.5B Merger Means Corp. HQ Leaves Maryland for Connecticut
16. Stanley Works buys Black & Decker - 2009-11-03 09:11:45 EST | Purchasing
17. Explore Baltimore County: Black & Decker, Stanley build a $4.5 billion deal
18. UPDATE 1-Stanley Works sees $5 EPS for combined co by 3rd year | Reuters
19. Stanley: Black & Decker Deal To Cut Pro Forma GAAP EPS By $3-$3.25 In 1st Yr - WSJ.com
20. Stanley, Black & Decker to merge | jacksonsun.com | The Jackson Sun
21. Stanley to buy Black & Decker in $4.5B deal | The Money Times
22. emii.com: Stanley To Buy Black & Decker For $4.5B
23. Namnews @ www.kamcity.com
24. FT Alphaville » Blog Archive » Stanley to buy Black Decker
25. BBC NEWS | Business | Rival firm to buy Black & Decker
26. Press Release: Stanley Works to acquire Black & Decker Corp. joining two toolmaking giants
27. Stanley and Black & Decker tool a near-perfect deal - Telegraph
28. Second Opinion: Tomorrow's editorials: Maryland loses Black & Decker headquarters - A virtual meeting of The Sun's editorial board, where issues are discussed, opinions made - baltimoresun.com
29. Loss of B&D headquarters leaves leaders crestfallen -- baltimoresun.com
30. Toolmaker Stanley to buy Black & Decker for $4.5B
31. The Associated Press: Stanley Works agrees to buy Black & Decker
32. Stanley cuts a deal to merge with its rival Black & Decker | Business
33. Bloomberg Business Report: Tool Deal & Verizon's New Phone - Jacksonville News Story - WJXT Jacksonville
34. Black & Decker to be acquired by rival
35. Ford Is Back on Track | The Big Money
36. MARYLAND: State to make case for Black & Decker jobs | delmarvanow.com | The Daily Times
37. Stanley Works, Black & Decker to Merge - WSJ.com
38. Black & Decker jumps, Stanley Works also up | Reuters
39. Black & Decker to join Stanley -- chicagotribune.com
40. Fitch Places Stanley Works on Watch Negative; Black & Decker on Watch Positive on Merger | Business Wire
41. Stanley Acquires Black and Decker
42. Black & Decker's Power Tool: Cold Hard Cash - Deal Journal - WSJ
43. FT.com / UK - Stanley seals $4.5bn Black & Decker tie-up
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