Stanley Black & Decker (SWK) agreed to buy Newell Brands (NWL) tool business this week in a $1.95 billion cash bid to expand their industrial cutting equipment sector. The sale, then, will now give Irwin, Lenox, and Hilmor brands to Stanley Black & Decker. The consumer brands company Newell Brands—who also owns Graco baby strollers, Elmer’s glue, and Mr. Coffee brewers—will use the sale to help pay down its debts.
Stanley Black & Decker reports that the sale will improve share value by 15 cents a piece within the first year following closing. And company CEO James M. Loree, who was recently elevated from president and chief operating officer, in July, called the acquisition of Newell Tools “an important step in our quest to further strengthen our presence in the global tools industry.”
Of course, Stanley Black & Decker has been looking to expand for some time, now. The New Britain, CT-based company will be able to broaden its global tools and storage business with this merger. More importantly, perhaps, the company will realize an annual cost savings between $80 million and $90 million after three years.
He goes on to say, “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.”
In addition, Newell Brands CEO Michael Polk comments, “Newell Brands’ new strategic plan establishes a sharp set of portfolio choices and investment priorities that will focus resources on the businesses with the greatest potential for growth. The actions we are taking will strengthen the underlying performance of the company and help unlock the unique opportunity for transformative value creation connected to the combination of Newell Rubbermaid and Jarden.”
So far, this has already been a good thing for both companies. Stanley Black & Decker saw a slight uptick in shares at open on Wednesday. Newell shares, of course, improved too, tacking on another 1.2 percent on the day after already increasing 14 percent earlier this week. All in all, Stanley Black & Decker is already up 10 percent on the year, with a notable 2.1 bump in early morning trades.