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Stanley Black & Decker to Buy Newell Tools for $1.95 Billion

Oct. 12, 2016
Stanley will gain the Irwin, Lenox and Hilmor brands as part of the transaction.

Stanley Black & Decker Inc. (IW 500/95) agreed to buy Newell Brands Inc.’s tools business for $1.95 billion in cash, helping the workshop giant push deeper into consumer and industrial equipment.

Stanley will gain the Irwin, Lenox and Hilmor brands as part of the transaction, which is expected to add 15 cents to earnings within a year of its completion. The division generated $760 million in revenue over the past 12 months, according to Newell. It makes everything from industrial saw blades to screwdrivers.

The acquisition tightens Stanley’s grip on the tool market at a time of industry upheaval. Sears Holdings Corp. also has been shopping around its Craftsman tool division, which may fetch about $2 billion as well, according to people familiar with the situation. Stanley has expressed interest in that business too, the people said earlier this month.

For Newell, the sale helps streamline its sprawling product portfolio after its merger with Jarden Corp. in April. The combination with Jarden created a company with $16 billion in sales and pushed Newell into new categories such as home fragrances and outdoor products.

Investors Applaud Deal

“This is a big strategic step by management to quickly clean up the portfolio to allow it to focus on its best growth and margin opportunities,” Bill Schmitz, an analyst for Deutsche Bank AG, said in a research note.

Investors applauded the deal, sending Stanley’s shares up as much as 4.3%. Its stock had been up 10% this year through Tuesday. Newell, up 14% this year, rose as much as 2% to $51.36 in the session.

Newell said earlier this month that it would be paring back its product line, turning 32 business units into 16 operating divisions. The company said at the time that it would divest about 10%ercent of its products, including most of its tools division, which account for about $1.5 billion in revenue.

Revenue at the tools unit fell 7.3% in 2015. But excluding currency changes, the sales would have gained 2.2%.

Changing Priorities

“Our priority is to create brands that resonate with our consumers and create value for our shareholders, ones that have tremendous growth potential and that are responsive to innovation,” Newell Chief Executive Officer Mike Polk said in an interview. That means focusing on other areas, such its writing, home-fragrance and baby-gear products, he said. Newell’s brands include Sharpie, Yankee Candle, Graco, Elmer’s glue and Mr. Coffee.

The process to sell the other targeted brands is underway and Newell hopes to wrap that up in the first half of next year. Those assets include the Voelkl and K2 winter sports brands, its heaters, humidifiers and fans business, and the Rubbermaid consumer-storage operations.

These divestitures will allow Newell to pay down debt and reach its stated goal of hitting a leverage ratio of 3 to 3.5 times earnings before interest, taxes, depreciation and amortization by the end of 2018. That means the company can return to acquisition mode within 12 to 18 months, which is faster than originally expected, Polk said.

Polk said when the Jarden merger was announced that he was aiming to squeeze $500 million in costs out of the business within four years. The company also is moving its headquarters from Atlanta to Hoboken, N.J. Jarden had been assembled by Martin E. Franklin, who used acquisitions to build the company’s vast array of brands.

At Stanley, meanwhile, the takeover is expected to bring annual cost savings of about $80 million to $90 million after three years. The company is paying about 13 times trailing 12-month earnings before interest, taxes, depreciation and amortization. The deal should close in the first half of 2017, according to New Britain, Conn.-based Stanley.

By Matt Townsend

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