2nd UPDATE:Stanley Works To Buy Black & Decker For $4.5 Billion
In Stock
(Updates with comment from antitrust expert, comment from Black & Decker
spokesman, latest share prices)
By Karen Talley and Anjali Cordeiro
Of DOW JONES NEWSWIRES
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.
The transaction would represent "a landmark move in the tools industry,”
and one that makes strong sense as the housing market resumes some growth and
raw materials prices rebound, said Brian Sozzi, retail analyst at Wall Street
Strategies. Together the companies have greater purchasing power.
Mass merchant retailers such as Wal-Mart Stores Inc. (WMT), Home Depot Inc. (
HD) and Lowe's Cos. (LOW) could be impacted because the combined Stanley Black &
Decker would have more power over holding the line on pricing when it comes to
supplying these companies than the tool makers do on a stand-alone basis, Sozzi
said.
The companies have overlapping operations such as in the industrial and
security areas that can be pared during the merger integration, Sozzi added.
The deal will give Black & Decker shareholders 1.275 shares of Stanley for
each share. Based on Monday's closing price, that values Black & Decker at $
57.57, a 22% premium. Stanley shareholders will hold a small majority stake in
the combined company, at 50.5%.
Wall Street applauded the deal, sending both companies' shares up in after-
hours trading. Black & Decker shares were recently up 22%, to $57.86, while
Stanley shares rose 4.3%, to $47.10.
The deal does raise issues about limiting competition, said David Balto,
former policy director at the Federal Trade Commission under President Bill
Clinton. "There are very straightforward antitrust concerns," Balto said. "These
are clearly the two major American handtool makers and they compete quite
directly on a wide variety of products."
The merger "would hit every handyman in the wallet," said Balto, who isn't
connected with the deal.
Roger Young, a spokesman for Black & Decker, said the companies don't expect "
significant antitrust issues" and that they expect antitrust regulators to
approve the merger. "Our products are highly complementary," he said, adding
that Black & Decker makes power tools and that Stanley is in the hand-tool
business. Stanley Works couldn't immediately be reached for comment.
A Department of Justice spokeswoman declined to comment on potential antitrust
issues.
Stanley Works, based in New Britain, Conn., makes well-known brands such as
its namesake tools. Black & Decker, based in Towson, Md., makes tools under that
brand name, as well as the DeWalt and Kwikset brands, among others.
John F. Lundgren, chairman and chief executive of Stanley, will be president
and CEO of the combined company. Black & Decker leader Nolan D. Archibald will
be executive chairman for three years.
Both companies have been cutting costs aggressively but earnings have
continued to decline. Black & Decker's recent third-quarter profit fell 35% as
the weak housing industry continued to hurt sales. The tool and building
supplies maker said recently that cost-cutting efforts were starting to help its
results, but that it didn't expect near-term demand to rebound. Stanley Works'
recent third-quarter profit plunged 63% as volume continued to slump.
-By Karen Talley and Anjali Cordeiro, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
(Jay Miller contributed to this article.)
(END) Dow Jones Newswires
11-02-091906ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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