Tool Titans To Join

The News: Md.-based Black & Decker, Stanley Works Seek $4.5 Billion Merger

The Impact: Local Jobs, Prestige To Take A Hit As State Loses Fortune 500 Hq

November 03, 2009|By Andrea K. Walker, Lorraine Mirabella and Jamie Smith Hopkins | Andrea K. Walker, Lorraine Mirabella and Jamie Smith Hopkins,andrea.walker@baltsun.com, Lorraine.Mirabella@baltsun.com and Jamie.Smith.Hopkins@baltsun.com

Black & Decker Corp., the Towson-based toolmaker founded here almost 100 years ago, said Monday that it plans to merge with The Stanley Works in a $4.5 billion all-stock deal that will bring together internationally known brands but reduce the number of local jobs.

For the Baltimore region, it is another in a long line of deals relocating corporate headquarters - and the decision-making power, charitable muscle and prestige they represent. Stanley would have controlling interest in the combined company, which would be named Stanley Black & Decker and headquartered in New Britain, Conn., where Stanley is located. The power tools division would remain in Towson.

Black & Decker spokesman Roger Young said there were about 1,500 workers in Maryland, mainly in the power tools division. Fewer than 250 work in corporate jobs - most of whom "will not likely be maintained," he said.

"This is pretty bad news for the state and the region," said Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute. "Black & Decker will be a division headquarters."

Some analysts called the deal a savvy move for two companies hurt by the slump in construction, and the companies described it as a merger of industry players on different sides of the tool spectrum.

"I think this is a very unique and complementary fit," said Nolan D. Archibald, Black & Decker's chairman and chief executive. "I don't think there would be another company that could fit better with Black & Decker or one that could fit better with Stanley. We are not directly competing, although we sell our products through the same distribution."

But Maryland political and economic-development leaders bemoaned the loss of a local Fortune 500 company - one of only three in the metro area. The others are Constellation Energy Group and Legg Mason Inc.

"Having the worldwide headquarters of Black & Decker here in Towson has long been a point of pride for Baltimore County," said County Executive James T. Smith Jr. "The company has been an important part of our economic landscape for decades. This is clearly not a positive development. But such decisions are based on global competition. This is the sort of thing we have to expect in this tough economy."

Other area headquarters lost to mergers or acquisitions include The Rouse Co., Alex Brown Inc. and USF&G Corp.

There could be more layoffs beyond the Black & Decker headquarters, though the companies have not yet targeted specific jobs. Black & Decker told employees in a memo that it expects "less than 10 percent of the combined company's work force to be affected," which means the possibility of several thousand job cuts overall. Together, they employ 38,000.

Under terms of the deal, Black & Decker shareholders would get 1.275 shares of Stanley common stock for each share of Black & Decker common stock. That's a premium of about 22 percent on Black & Decker's closing share price on Friday. The deal will work out to about $57 or $58 per share for Black & Decker shareholders, who saw their stock close at $47.34 Monday.

Stanley shareholders will own just over 50 percent of the equity of the combined company, with Black & Decker shareholders owning the rest. The companies said they expect the deal to close in the first half of 2010.

Black & Decker, with its DeWalt brand, is a leader in the professional power tools market and sells do-it-yourself tools under the corporate name. It has 20,000 employees worldwide. Stanley - a 166-year-old firm that sells tools under its name, plus such brands as FatMax and Bostitch - employs 18,000 people.

Both companies have been buffeted by the recession and housing-market collapse. Less demand for new construction and home-improvement projects has meant less need for tools.

In 2008, Black & Decker's profit dropped 43 percent, to about $294 million. Stanley's profit shrank 30 percent, to $225 million. Each has laid off workers in the past year.

"Both companies have been hit hard throughout the downturn, but Black & Decker more so," said Anthony Dayrit, an equity analyst with Morningstar Inc. Stanley has been more protected because it has an industrial product offering and a security business, he said.

Archibald and a spokesman for Stanley said that even though the steep drop in housing starts hurt sales, the economy had nothing to do with the decision to merge.

"If you look at our balance sheet and look at our cash flow, it had nothing to do with the economy," Archibald said. "Not only were we surviving, we were prospering. Both of our companies were doing extremely well in a very difficult economy. We had a very bright future. It was a question of if it would have been brighter with Stanley."

Said Tim Perra, a spokesman for Stanley: "We think the combined company would be able to take advantage of a resurgence in the market. But this really is a transition that makes a lot of sense no matter when."

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