Windmere deal boosts B&D stock Household products line sale prompts 2.4% rise

May 13, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Black & Decker Corp.'s shares jumped more than 2 percent yesterday after analysts said the Towson-based company fetched a strong price for its Western Hemisphere household products business.

The company announced the $315 million sale of its ailing household products business -- excluding its lighting and cleaning lines -- to Windmere Durable Holdings Inc. on Monday ** after the stock market closed. Yesterday, Black & Decker shares jumped as high as $55.25 -- a 52-week high -- before settling at $54.875, up $1.3125.

"The price they got was above what we were expecting," said Kenneth M. Gassman, an analyst for Davenport & Co. in Richmond, Va. "It relieves Black & Decker of inefficient operations and they're getting rid of some debt. It's very hard to tick off what's wrong with this deal and very easy to tick off what's right."

Black & Decker put its household business up for sale in January, when it also said it would eliminate 3,000 jobs in a cost-cutting plan intended to boost profits. The company also said it intended to sell its glass container-making machinery and True Temper golf club shaft business. The sales would fetch about $500 million, the company said at the time.

Analysts said yesterday that Monday's deal puts Black & Decker on a path to easily beat that estimate. "These guys are wizards at selling businesses," said Nicholas P. Heymann, a Prudential Securities analyst.

Heymann said the deal with Miami Lakes, Fla.-based Windmere was a coup. He said Black & Decker not only got a good price for what it sold, but managed to keep the SnakeLight and Dustbuster product lines.

"That's the most profitable segment of household products," with about $140 million in annual sales and $10 million in operating profit, he said. Folded into Black & Decker's power tool businesses, that operating profit will increase to about $15 million overnight, Heymann said.

The deal excluded Black & Decker's household products business in Brazil. The company also said it will hold on to its European household products business.

Heymann estimated that sales of the other Black & Decker properties on the block -- glass container-making machinery and golf club shaft businesses -- will put the company's revenue at between $550 million and $600 million.

Heymann, who has a "buy" recommendation on the stock, also said the restructuring will dilute profits far less than the company initially expected.

Gassman, the Davenport analyst, is also bullish. He said he expects Black & Decker's shares to reach $60 by early next year. "This is a company that's done what it said it was going to do," he said.

Pub Date: 5/13/98

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