What Stanley Black & Decker Gets With Newell Tool Acquisition

Industrials

Published: October 12, 2016 10:10 am

Last Updated: January 13, 2020 2:30 am

When Stanley and Black & Decker first merged, it created an even larger powerhouse in the tool industry. Some people might have thought that it would be harder for the combined Stanley Black & Decker Inc. (NYSE: SWK) to create as large of moves for the future. Now we have news that the U.S. tool giant is buying the tool division of Newell Brands Inc. (NYSE: NWL).

24/7 Wall St. wanted to see what each company is really getting from this deal, and how it compares to the entities as a whole.

The tools division stake is priced at $1.95 billion in cash (includes retained accounts receivable) and includes the industrial cutting and the hand and power tool accessory brands of Irwin and Lenox. Net sales for the divested business were approximately $760 million for the past 12 months. Newell Tools has more than 2,500 employees around the world.

This latest news is on the heels of Newell previously announcing that it will sell several of its divisions that are considered to be non-core assets. After sharpening its portfolio of brands, Newell is consolidating what are listed as 32 business units down into 16 operating divisions. The company is further looking to complete the sales by mid-2017.

This latest deal for Stanley Black & Decker was projected to bring $80 million to $90 million in annual cost savings by the third year after the unit is integrated. The deal is also expected to add roughly $0.15 to the earnings per share in the first fiscal year after closing — and potentially could add up to $0.50 in earnings per share by the third year.

It should be noted that the gains do exclude $125 million to $140 million worth of charges tied to restructuring and acquisition costs. Stanley Black & Decker also anticipates roughly $40 million worth of charges tied to inventories.

Shares of Newell Brands were up less than 2% to $51.22 Wednesday morning, and the market cap is $24.7 billion.

Stanley Black & Decker shares also were up less than 2%, at $119.78. The market cap is $18.0 billion, and the consensus analyst price target is $128.38.

Stanley Black & Decker’s president and chief executive officer, James M. Loree, said of the deal:

Newell Tools is an important step in our quest to further strengthen our presence in the global tools industry. The addition of the iconic Lenox® brand and very strong Irwin brand, as well as their associated power tool accessory and hand tool products, opens up exciting new sources of global growth in similar ways, albeit on a smaller scale, to what Black + Decker did in recent years. Thus, the acquisition of Newell Tools, our first major acquisition since 2013, will provide both a source of inorganic growth in year one and an organic boost thereafter. … This transaction, with our multi-faceted approach to revenue expansion, is entirely consistent with our strategy of driving above-market growth in a low growth world.

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