Blog Coverage Stanley Black and Decker is Back in the M&A Game with Billion Dollar Deal with Newell Brands

LONDON, UK / ACCESSWIRE / October 13, 2016 / Active Wall St. blog coverage looks at the headline from Stanley Black & Decker, Inc. (NYSE: SWK) as the company announced on October 12th, 2016, that it has entered into a definitive agreement to acquire the Tools business of Newell Brands (NYSE: NWL), which includes hand tool and power tool accessory brands Irwin® and Lenox®, for $1.95 billion in cash. This is the company’s first major acquisition since 2013. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The Agreement

Stanley Black & Decker expects the transaction to result in annual cost synergies of approximately $80 million to $90 million within three years. The purchase price of $1.95 billion represents a LTM EBITDA multiple of approximately 13x (approximately 8x post-synergies). The acquisition is expected to be approximately $0.15 accretive to earnings per share (EPS) in year one post-closing, excluding approximately $125 million to $140 million of restructuring and other deal related costs and approximately $40 million of non-cash inventory step-up charges, which in the aggregate will largely be incurred during years one and two. The Company expects to fund the acquisition with a combination of available cash and debt.

The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to be finalized in the first half of 2017.

Newell is an industry leader with an array of strong brands and products that are highly complementary to Stanley Black & Decker. With LTM revenues of approximately $760 million, and low- to mid-single digit average sales growth since 2011, Newell Tools is well-positioned to enhance the offerings and broaden the reach of Stanley Black & Decker’s global tools and storage business.

Stanley Black & Decker’s President and Chief Executive Officer, James M. Loree commented regarding 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. 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.”

Newell Streamlining Portfolio

For Newell, the deal is part of its strategy to sell assets and reduce its debt following the acquisition of Jarden Corp. The agreement to combine with Jarden was announced on December 14, 2015, for per share consideration equal to $21 in cash and 0.862 of a share in Newell Brands’ stock. In July, 2016, Newell closed the sale of its Levolor® and Kirsch® window coverings brands to Hunter Douglas, for gross proceeds from the transaction were approximately $270 million, which includes the retention of accounts receivable.

On October 04th, 2016, Newell announced that it will simplify its operating structures consolidating the existing 32 Business Units to 16 Operating Divisions, including the creation of a new global enterprise-wide e-Commerce Division. The company said that it would divest about 10% of its products, including most of its tools division.

Serial Acquisition

Stanley Black & Decker had a long history of Merger & Acquisition, about 100 acquisitions over 15 years. In November, 2009, the then, The Stanley Works, announced a merger agreement with The Black & Decker Corp. in an all-stock transaction valued at approximately $4.5 billion. Before the end of 2013, the company announced 2 years stay on new M&A deals in order to focus on paying down the debt and improve synergy.

Stock Performance

On Wednesday, Stanley Black & Decker’s share price finished the trading session at $121.05, advancing 2.88%. A total volume of 2.67 million shares exchanged hands, which was higher than the 3 months average volume of 897.09 thousand shares. The stock has advanced 12.16% and 23.14% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the company have gained 15.16%. The stock is trading at a PE ratio of 18.76 and has a dividend yield of 1.92%.

Newell Brands’ share price ended yesterday’s trading session at $51.42, climbing 2.15%. A total volume of 4.71 million shares exchanged hands, which was higher than the 3 months average volume of 3.82 million shares. The stock has advanced 17.24% and 23.74% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the company have gained 18.13%. The stock is trading at a PE ratio of 79.23 and has a dividend yield of 1.48%.

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