Stanley Wants Bigger Tool Works (SWK, BDK, SNA)

By Douglas A. McIntyre Updated Mar 10, 6:21PM EDT · Published Nov 2, 4:57PM EST

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The tool sector for builders and home repair is about to get a lot smaller for investors looking for diversification of company choices to invest in. The Stanley Works (NYSE: SWK) and The Black & Decker Corporation (NYSE: BDK) have proposed a merger which would unite the brands. The companies see accretion to earnings per share of about $1.00 per share by year three with some $350 million in cost synergies. This deal is a stock for stock merger where Black & Decker shareholders would receive a fixed shares ratio of 1.275 shares Of Stanley common stock per 1 share held of Black & Decker common stock.

The two companies call this a definitive merger agreement to create Stanley Black & Decker, which would become an $8.4 billion global industrial leader in an all-stock transaction valued at about $4.5 billion.

The transaction has already been approved by the boards of directors of both companies, and the deal would be expected to be completed in the first half of 2010. The terms call for an implied premium of 22.1% to Black & Decker’s share price as of Friday, October 30, 2009. After the closing, Stanley shareholders would own about 50.5% of the equity of the combined company.

Also noted in management is that the nine members of the current Stanley board of directors will be joined by six new members from Black & Decker’s board of directors. John F. Lundgren, Chairman and CEO of Stanley, will be President and CEO of the combined company. Nolan Archibald, Chairman, President, and CEO of Black & Decker will become executive Chairman of the combined company for a period of three years.

Stanley was founded in 1843 is a diversified industrial company with hand tools and strong construction and do-it-yourself, security and industrial businesses with well-known brand names such as Stanley, FatMax, Bostitch, Facom, Proto, Mac Tools, Sonitrol, Stanley Security Solutions, Best, and Vidmar.

Black & Decker has roots dating to 1910 and brings in power tools and a diverse product offering under the brands of Black & Decker, DeWalt, Porter-Cable, Emhart Teknologies, Kwikset, Baldwin and Price Pfister.

This is effectively an acquisition by Stanley for Black & Decker. Both companies are trading up on the news, with Black & Decker up 20% at $56.82 and Stanley Works up 2.3% at $46.20. Before the buyout was announced, the market cap of Stanley was $3.2 billion and the market cap of Black & Decker was $2.8 billion. With these companies being under $5 billion each, it is hard to imagine that antitrust regulation would come down too hard on the companies.

The merger only includes these two companies, but it has shares of Snap-On Inc. (NYSE: SNA) trading up 1.4% at $36.60 in after-hours trading. Its market cap is $2.08 billion as of the close.

Jon C. Ogg

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.