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Stanley Works and The Black & Decker Merge to Form Stanley Black & Decker

The Stanley Works (NYSE:SWK) and The Black & Decker Corporation (NYSE:BDK):

  • Unites Two Highly Complementary Companies With Iconic Brands;

  • EPS Accretion Of Approximately $1.00 Per Share Projected By Year Three;

  • $350 Million In Cost Synergies Expected;

  • Black & Decker Shareholders To Receive Fixed Ratio Of 1.275 Shares Of Stanley Common Stock For Each Share Of Black & Decker Common Stock

Pictured from left to right: Nolan D. Archibald, Chairman, President & Chief Executive Officer, The Black & Decker Corporation and John F. Lundgren, Chairman & Chief Executive Officer, The Stanley Works

The Stanley Works (NYSE:SWK), a worldwide supplier of quality tools and engineered solutions for industrial, construction and do-it-yourself use, and security solutions for commercial applications, and The Black & Decker Corporation (NYSE:BDK), a global manufacturer and marketer of quality power tools and accessories, hardware and home improvement products, and technology-based fastening systems, announced today that they have entered into a definitive merger agreement to create Stanley Black & Decker, an $8.4 billion global industrial leader in an all-stock transaction valued at approximately $4.5 billion.

The combination brings together two highly complementary companies with iconic brands and strong growth prospects. Founded in 1843, Stanley is a diversified industrial company with a global leadership position in hand tools and strong construction and do-it-yourself (CDIY), security and industrial businesses with well-known brand names such as Stanley, FatMax, Bostitch, Facom, Proto, Mac Tools, Sonitrol, Stanley Security Solutions, Best, and Vidmar. With roots dating back to 1910, Black & Decker brings a global leadership position in power tools and a diverse product offering under an array of renowned brands including Black & Decker, DeWalt, Porter-Cable, Emhart Teknologies, Kwikset, Baldwin and Price Pfister.

Under the terms of the transaction, which has been approved by the boards of directors of both companies, Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley common stock for each share of Black & Decker common stock they own, representing an implied premium of 22.1% to Black & Decker’s share price as of Friday, October 30, 2009. Upon closing, which is expected in the first half of 2010, Stanley shareholders will own approximately 50.5% of the equity of the combined company and Black & Decker shareholders will own approximately 49.5%. The nine members of the current Stanley Board of Directors will be joined by six new members from Black & Decker’s Board of Directors.

John F. Lundgren, Chairman and Chief Executive Officer of Stanley, will be President and Chief Executive Officer of the combined company. Nolan D. Archibald, Chairman, President, and Chief Executive Officer of Black & Decker, who has been CEO for 24 years, will be Executive Chairman of the combined company for three years.

Strategic Rationale

Combining Stanley and Black & Decker creates a stronger, globally diversified company with a broad array of products and services. The combination will enhance both companies’ core strengths and provide increased resources to invest in growth opportunities.

  • Comprehensive Portfolio Of Iconic Brands. Combining the significant brand equity inherent in both companies will create a supplier of choice for tools, with even greater worldwide recognition and appeal among retailers, commercial customers and individual consumers.
  • Complementary Global Product And Service Offerings. Black & Decker’s position in power tools, security hardware products and engineered fasteners fits seamlessly with Stanley’s product and service offerings in hand tools and mechanical and electronic security solutions, with no significant overlap in product lines.
  • Stronger, More Diversified Global Company. The combined company will have greater scale in hand and power tools and storage, mechanical and electronic security, as well as a continued strong presence in engineered fasteners and plumbing products. It will also have a broader geographic sales footprint with additional strength in emerging markets; a world-class innovation process; global low cost sourcing and manufacturing platforms; a shared commitment to operational excellence; and a proven business management strategy in the Stanley Fulfillment System.
  • Significant Shareholder Value Creation. The combination is expected to result in earnings per share (EPS) accretion of approximately $1.00 by the third year after closing, as shareholders of both companies share in the upside potential of the combined company, including approximately $350 million in estimated annual cost synergies fully realized within three years. These will be primarily derived from reductions in corporate overhead, business unit and regional consolidation, manufacturing and distribution, and purchasing. In addition, through the implementation of the Stanley Fulfillment System across Black & Decker’s businesses, the Company expects to achieve significant improvements in working capital and asset efficiency, as well as complexity reduction. The combination is expected to generate approximately $1.0 billion in free cash flow annually by the third year after closing. Over the long term, this will be used to invest in shareholder value creation opportunities, including further investment in security solutions, engineered fastening, and other high-growth platforms.
  • Enhanced Financial Strength. The combined company will benefit from greater scale and efficiencies in its tool business, higher margins and stable earnings generated by its growing security segment, a highly diversified revenue base across geographies and business lines, and its strong financial position. The Company will target a strong investment grade credit rating. With its substantial cash flow and long history of paying consecutive dividends, the new company expects to maintain Stanley’s current dividend policy.

In addition to Messrs. Lundgren, Archibald, and Loree, Stanley Vice President and Chief Financial Officer Donald Allan, Jr. will be part of the executive team as Senior Vice President and Chief Financial Officer of the combined company, and key members of both the Stanley and Black & Decker executive teams will hold positions in the combined organization. An Integration Steering Committee has been identified to oversee bringing together the two companies after closing and will be co-chaired by Mr. Archibald and Mr. Lundgren.

The combined company will retain a presence in both Connecticut and Maryland, with its corporate headquarters in New Britain and the Power Tools headquarters remaining in Towson.

The transaction is subject to customary regulatory approvals and closing conditions and requires the approval of Stanley and Black & Decker shareholders. Deutsche Bank and Goldman, Sachs & Co. acted as Stanley’s financial advisors and Cravath, Swaine & Moore LLP acted as Stanley’s legal counsel. Black & Decker’s financial advisor was J.P. Morgan Securities Inc. and its legal advisors were Hogan & Hartson LLP and Miles & Stockbridge P.C.


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