Stanley to buy Black & Decker

CHICAGO | Toolmakers Stanley Works and Black & Decker Corp. are betting that together they can wring out more profit and can better position themselves for a housing-market recovery than they could apart.

In an all-stock deal that would create the largest toolmaker in a fragmented market, Stanley Works on Monday agreed to pay $3.46 billion for its rival.

The deal will cut costs by $350 million within three years, likely through an unspecified number of job cuts, and increase earnings per share by $1 within three years, the companies said. Executives said most of the savings will come from reducing corporate overhead and consolidating business units.

Stanley Chairman John F. Lundgren will be president and CEO of the new company. Black & Decker Chairman, President and CEO Nolan D. Archibald will serve as executive chairman for three years.

Mr. Archibald told analysts Tuesday that the deal wasn’t driven by the recession. “Both companies had a very bright future on a stand-alone basis,” he said.

The deal began six months ago when Mr. Lundgren invited Mr. Archibald to lunch to discuss a deal, Black & Decker’s CEO said. The executives met again in June, he said.

“This is a romance that started approximately 28 years ago,” Mr. Archibald said. Three times in that span, Stanley and Black & Decker executives discussed a combination, he said.

Black & Decker, based in Towson, Md., has 22,100 workers. Stanley Works, based in New Britain, Conn., has 18,200 workers. The new Stanley Black & Decker will retain headquarters in Connecticut, while its power-tool division will remain headquartered in Maryland.

There is little overlap in the companies’ product lines, said James C. Lucas, managing director of Janney Montgomery Scott LLC. Stanley is a leader in consumer and industrial hand tools and security, and Black & Decker in power tools.

Stanley’s brands include its Stanley tools line and FatMax, Bostitch and Mac Tools, which are used on cars. In addition to its namesake line, Black & Decker owns DeWalt, Porter-Cable, Kwikset and Baldwin brands, popular with consumers and professionals. Black & Decker also manufactures some Sears Craftsman products, such as air compressors, though that’s a small part of its business.

Morningstar analyst Anthony Dayrit said Black & Decker, which has a residential security business offering products such as door locks, may have been enticed by Stanley Works’ lucrative security business that targets commercial customers, such as schools and hospitals. During the third quarter, Stanley’s security business was the only one of its three units to post an increase in profit.

Black & Decker shareholders will receive stock valued at $57.57 for each share held, representing a 22 percent premium to Black & Decker shares’ closing price. Based on the company’s 60.2 million shares outstanding July 24, the deal is worth $3.46 billion.

Black & Decker shares climbed $14.66, or 31 percent, to $62 Tuesday. Stanley Works shares rose $4.54, or 10.1 percent, to $49.69.