Stanley to buy Black & Decker for $4.5 billion in stock

Stanley Works agreed to buy Black & Decker Corp. for $4.5 billion in stock, in a deal that will enable the companies — household names in the U.S. tools industry — to cut costs and exert more influence on pricing. (Wall Street Journal)

Both companies have felt the pressures of the recession, particularly given their close links with the housing industry. The companies expect the combination, which has been approved by both companies’ boards, will result in savings of $350 million a year and to add to earnings by the third year.

The transaction would represent “a landmark move in the tools industry” and one that makes strong sense as the housing market resumes some growth and raw materials prices rebound, said Brian Sozzi, retail analyst at Wall Street Strategies. Together the companies have greater purchasing power.

Mass merchant retailers such as Wal-Mart Stores Inc., Home Depot Inc. and Lowe’s Cos. could be impacted because the combined Stanley Black & Decker would have more power over holding the line on pricing when it comes to supplying these companies than the tool makers do on a stand-alone basis, Sozzi said.

The companies have overlapping operations such as in the industrial and security areas that can be pared during the merger integration, Sozzi added.

The deal will give Black & Decker shareholders 1.275 shares of Stanley for each share. Based on Monday’s closing price, that values Black & Decker at $57.57, a 22 percent premium. Stanley shareholders will hold a small majority stake in the combined company, at 50.5 percent.

Read the full story at online.wsj.com.