Stanley to buy Black & Decker in $4.5B all-stock deal 

Posted: 4:55 pm Mon, November 2, 2009
By Danielle Ulman
Daily Record Business Writer

Towson-based toolmaker giant Black & Decker Corp. agreed to a $4.5 billion acquisition by Connecticut-based hardware and home improvement manufacturer Stanley Works, the companies said Monday.

The all-stock deal will create Stanley Black & Decker, an $8.4 billion global industrial firm.

“I’m very surprised. I always thought Black & Decker was a technological and marketing leader in its industry. I always thought they would be the buyer, which is what the history has been,” said Richard Clinch, director of economic research for the Jacob France Institute at the University of Baltimore.

“I think it’s a sad time for the Baltimore region and the state,” he said.

The Baltimore area will lose a corporate fixture headquartered in the region for nearly 100 years. The combined company’s corporate headquarters will be located in New Britain, Conn., and the company’s power tools headquarters will remain in Towson, where Black & Decker employs about 1,200.

“In terms of an image, Maryland does lose another Fortune 500 company,” said Darius Irani, director of RESI’s Applied Economics and Human Services group.

“So that is kind of another blow to our ego,” he said. “It’s one less corporate entity that’s able to support local entities.”

After Black & Decker is gone, the only Fortune 500 companies headquartered in Maryland will Lockheed Martin, Constellation Energy Group, Marriott International, Coventry Health Care, Host Hotels & Resorts and Legg Mason.

The economic downturn, particularly the collapse of the housing market, has had a big impact on Black & Decker, which has had several rounds of layoffs over the past few years.

Black & Decker reported sales of $3.473 billion in the first nine months of 2009, down from $4.708 billion the year before, according to the company’s third-quarter earnings report. Earnings fell from $249.9 million to $98.6 million during that same period.

“It gives them a stronger market position in what’s still likely to be a challenging market for commercial construction here and abroad,” said Nicholas P. Heymann, an analyst with Sterne, Agee & Leach in New York.

Heymann added that he does not see residential or commercial construction returning to previous levels for at least a couple of years. Still, he said he was a little surprised at the timing for Black & Decker because the company had just started to streamline its costs.

In a letter to employees Monday, Nolan D. Archibald, chairman, president and CEO of Black & Decker, said Stanley came to Black & Decker several months ago to pitch the idea of a merger, which the company said would facilitate growth.

“Since that initial discussion, we have had numerous interactions with Stanley and subsequent discussions with outside financial and legal advisors to examine all aspects of the proposed merger and what it will mean for us,” he said. “Our [b]oard of [d]irectors concluded that uniting our two companies, with their complementary product and market fit, makes excellent financial and strategic sense.”

Archibald, who has been Black & Decker’s CEO for 24 years, will be executive chairman of Stanley Black & Decker for three years. John F. Lundgren, chairman and CEO of Stanley, will serve as president and CEO of the combined company.

In a memo to employees, officials at Stanley said they expected the merger to affect less than 10 percent of the companies’ workers. Black & Decker has about 20,000 employees worldwide. Stanley employs 18,000.

The companies have complementary lines of tools that are not likely to overlap, Heymann said. Black & Decker is known for its tool lines like DeWalt, Kwikset, Baldwin and Price Pfister, while Stanley’s brands include FatMax, Bostitch, Best and Vidmar.

“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,” Lundgren said in a statement.

“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,” he said.

The deal is expected to create shareholder value through $350 million in cost reductions, which Archibald called the main driver behind the deal. The companies said the deal should add $1 a share to earnings by the third year.

Under the terms of the deal, Black & Decker shareholders will receive 1.275 shares of Stanley common stock for each owned share of Black & Decker common stock. That values Black & Decker’s shares at $57.57, a 22 percent premium over Friday’s closing price.

Shares of Black & Decker’s stock gained 12 cents Monday to close at $47.34 Monday. Stanley’s shares lost 8 cents to close at $45.15. The deal was announced after the markets closed.

In after-hours trading, Black & Decker’s shares were trading as high as $57 and Stanley’s share were at $46.80.

Pending regulatory approval, the companies expect the transaction to close during the first half of 2010.

Daily Record staff writers Liz Farmer and Nicholas Sohr contributed to this article.