Toolmaker Deal Ends a 28-Year Courtship
By MICHAEL J. de la MERCED and ZACHERY KOUWE
For nearly three decades, Stanley Works and Black & Decker, two of the most recognizable names in home improvement, have talked about combining through a merger.
On Monday afternoon, the two finally succeeded. Stanley agreed to buy Black & Decker for about $3.5 billion in an all-stock transaction, creating a global tool maker worth about $8.4 billion.
The combined business, to be called Stanley Black & Decker, will own many names familiar to do-it-yourselfers, including the companies’ namesake lines, Stanley’s FatMax and Bostitch and Black & Decker’s DeWalt and Porter-Cable offerings. The two companies have little overlap in their products, with Stanley best known for hand tools and construction equipment and Black & Decker for power tools.
Combining the two companies made enough sense that talks about a potential merger stretch back 28 years. But successive generations of leaders raised the idea again and again, only to meet several obstacles, including who would run the merged entity.
Then six months ago, the companies’ current chief executives — John F. Lundgren of Stanley and Nolan D. Archibald of Black & Decker, who has worked for the company 24 years — met over lunch to once again ponder a merger. The two had known each other casually, sometimes meeting at conferences, but had spoken to each other only three or four times, Mr. Lundgren said in an interview.
“The more we looked at it, the more it made sense,” Mr. Archibald said in an interview, adding that they almost immediately recognized some $350 million in cost savings achievable within three years. The two sides then quickly gathered teams to strike a merger, having already identified important elements like the desire for an all-stock transaction.
Under the terms of the deal, Black & Decker shareholders will receive 1.275 Stanley shares for each of their stock holdings.
Shares in both companies have risen by double digits over the last three months. Stanley’s stock closed slightly down on Monday, before the deal was announced, at $45.15, while Black & Decker’s closed up slightly at $47.34. Both stocks moved higher in after-hours trading.
“The synergies in this deal were so great that we thought both sets of shareholders should share in that,” Mr. Lundgren said.
Upon completion of the deal, Mr. Lundgren will retain the chief executive position and Mr. Archibald will become executive chairman for three years. Mr. Archibald said that he wanted to retain a role in the combined company, but recognized that Mr. Lundgren, who is eight years younger, would be a good choice to remain chief executive.
Executives said most of the savings will come from reducing corporate overhead and consolidating business units and manufacturing, distribution and purchasing. Black & Decker has 22,100 workers and Stanley has 18,200 employees.
Together with a slate of other deals announced in recent days, the Stanley-Black & Decker combination may represent continuing confidence that the worst of the economic problems have passed. Deal makers say that company management teams have shown a willingness to again pursue transactions they have considered for some time.
The deal also represents a coming wave of consolidation in the industrial sector as companies try to cut additional costs as revenue remains flat. Both Stanley and Black & Decker have been hurt by the real estate crash, which has slowed new construction and spending on new equipment.
Both companies arose from small machinist shops that have since grown to multibillion-dollar tool makers.
Stanley was founded in 1843 when Frederick Trent Stanley set up shop in New Britain, Conn., to make door bolts and other wrought-iron hardware. Black & Decker traces its roots to 1910 and received its first patent in 1917, for a pistol grip and trigger switch on an electric drill.
The deal is expected to close in the first half of next year. Under the terms of the agreement, Stanley shareholders will own about 50.5 percent of the combined company, while Black & Decker investors will hold about 49.5 percent. The board will consist of Stanley’s nine directors and six from Black & Decker.
Stanley Black & Decker is expected to keep its corporate headquarters in New Britain, Conn., with its power tools division in Towson, Md.
Stanley was advised by Deutsche Bank, Goldman Sachs and the law firms Cravath, Swaine & Moore and Venable. Black & Decker was advised by JPMorgan Chase and the law firms Hogan & Hartson and Miles & Stockbridge.
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