Stanley Works (NYSE:SWK)
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5 Years : From Apr 2012 to Apr 2017
Stanley Works (SWK) expects its combination with Black & Decker Corp. (BDK) will cut pro forma earnings per share by $3 to $3.25 in the first year after the deal closes, based on generally accepted accounting principles.
During a conference call to discuss the $4.5 billion deal, Stanley's Chief Financial Officer Donald Allan Jr. said the combined companies will see 25 to 35 cents a share in earnings accretion during the second year and will result in pro forma GAAP earnings boosted by 95 cents to $1.05 a share by the third year after closing.
Stanley Chairman and Chief Executive John Lundgren said with "minimum overlap" between the two companies, the deal should close in the first half of 2010.
Pro forma 2009 revenue would be $8.4 billion, but assuming $350 million in cost savings from the combination within three years of the deal's closing and improved margins across the portfolio, the new company should generated about $1 billion in free cash flow and more than $1.5 billion in earnings before interest, taxes, depreciation and amortization by 2012, executives said.
The earnings dilution in the first year is tied to $400 million in one-time costs associated with integrating the two companies, mostly tied to headcount reductions.
Stanley Works late Monday announced it will buy Black & Decker for $4.5 billion in stock in a deal aimed at allowing both companies to cut costs and reinvest back into growth platforms, such as security solutions and engineered fasteners.
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% premium. Stanley shareholders will hold a small majority stake in the combined company, at 50.5%.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; firstname.lastname@example.org