StanleyWorks (SWK.N), the industry's leading manual tool manufacturer, will acquire power tool maker Black&Decker (BDK.N) for $3.46 billion. The deal will be conducted in stock, and success will help boost profits. Rate and reduce costs.
The two companies claim that the main force driving the deal is that mergers and acquisitions can cut annual costs by $350 million, strengthen financial strength, and make the product line more diverse.
“Our products complement each other,†said Nolan Archibald, CEO of Black & Decker, in an interview. “From a product and geographic perspective, the merger is profitable and will significantly reduce costs.â€
Each share of the company held by the company can be exchanged for 1.275 shares of Stanley, which is equivalent to a 22% premium compared to the closing price of Black & Decker. Stanley shares closed at $57.56 on Monday.
Stanley CEO John Lundgren said that cost reductions will come mainly from consolidation of business units and regions, reduction of redundant employees, and adjustments to manufacturing, distribution and procurement operations.
He said that the layoffs will be moderate, "of course it will be less than 10%, not much."
The CEOs of both companies stated that they are not worried about antitrust issues. Both are top tool manufacturers, Black & Decker focuses on power tools, and Stanley focuses on hand tools.
Black & Decker shares rose 18% in after-hours trading, while Stanley shares rose 4.1%.
Prepare for recovery
WallStreetStrategies analyst Brian Sozzi said the merger was very sensible, "will help them prepare well before the property market picks up and the commodity market finally recovers."
The new company will be named StanleyBlack&Decker after the merger.
The third year after the transaction ended, the merger is expected to contribute about $1 in earnings per share (EPS).
Both parties expect that free cash flow will reach approximately $1 billion by the end of the third year.
Stanley CEO Lundgren said that the $1 billion cash flow, combined with the business development team's mergers, will help the company grow further, including security, infrastructure and healthcare.
Lundgren will be the CEO of the new company after the merger, and Decker CEO Archibald will take over the chairmanship for a three-year term.
The two companies claim that the main force driving the deal is that mergers and acquisitions can cut annual costs by $350 million, strengthen financial strength, and make the product line more diverse.
“Our products complement each other,†said Nolan Archibald, CEO of Black & Decker, in an interview. “From a product and geographic perspective, the merger is profitable and will significantly reduce costs.â€
Each share of the company held by the company can be exchanged for 1.275 shares of Stanley, which is equivalent to a 22% premium compared to the closing price of Black & Decker. Stanley shares closed at $57.56 on Monday.
Stanley CEO John Lundgren said that cost reductions will come mainly from consolidation of business units and regions, reduction of redundant employees, and adjustments to manufacturing, distribution and procurement operations.
He said that the layoffs will be moderate, "of course it will be less than 10%, not much."
The CEOs of both companies stated that they are not worried about antitrust issues. Both are top tool manufacturers, Black & Decker focuses on power tools, and Stanley focuses on hand tools.
Black & Decker shares rose 18% in after-hours trading, while Stanley shares rose 4.1%.
Prepare for recovery
WallStreetStrategies analyst Brian Sozzi said the merger was very sensible, "will help them prepare well before the property market picks up and the commodity market finally recovers."
The new company will be named StanleyBlack&Decker after the merger.
The third year after the transaction ended, the merger is expected to contribute about $1 in earnings per share (EPS).
Both parties expect that free cash flow will reach approximately $1 billion by the end of the third year.
Stanley CEO Lundgren said that the $1 billion cash flow, combined with the business development team's mergers, will help the company grow further, including security, infrastructure and healthcare.
Lundgren will be the CEO of the new company after the merger, and Decker CEO Archibald will take over the chairmanship for a three-year term.
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