NYSE rebukes Black & Decker over merger

Opinion that board member's partnership with Archibald should have been considered believed unlikely to stop deal

March 11, 2010|By Lorraine Mirabella | lorraine.mirabella@baltsun.com

The New York Stock Exchange suggested that Black & Decker Corp. should have considered a board member's real estate partnership with Chief Executive Nolan D. Archibald when deeming that director independent for the purposes of evaluating a merger with The Stanley Works.

Towson-based Black & Decker disclosed Wednesday its discussions with representatives of the stock exchange, which took place after the company issued a news release Tuesday regarding inquiries into the "private business relationship" between Archibald and the director, M. Anthony Burns, and whether it compromised Burns' independence. Black & Decker had indicated the relationship wasn't relevant.

Burns served on a special committee convened to evaluate the $4.5 billion Stanley deal and joined other board members in unanimously approving it along with a lucrative pay package for Archibald, who will serve as executive chairman of the combined Stanley Black & Decker.

It was unclear whether Black & Decker's misinterpretation of stock exchange rules would have any implications for the company, but the disclosure is not likely to derail the merger. Shareholders are set to vote on the all-stock transaction Friday.

In its Tuesday disclosure, Black & Decker said Archibald and Burns have been co-owners since August 2005 of the Red Ledges real estate development in Heber City, Utah, a private golf community where luxury homes start at $900,000. The toolmaker pointed out that the company is not affiliated with the project.

Black & Decker said in the release that "personal business relationships between individuals (as opposed to relationships with the company) generally are not relevant to the independence tests under the New York Stock Exchange rules because they do not create a material relationship between a director and the company."

Then on Wednesday the company said in another release that representatives from the stock exchange advised the company that "the NYSE believes relationships between a director and a member of senior management that are material to either party should be considered by a board of directors in its evaluation of a director's independence."

A Black & Decker spokesman did not return calls Wednesday.

Douglas M. Schmidt, chief executive of financial services company Chessiecap Inc., had questioned the relationship in a series of commentaries on Citybizlist Baltimore, in which he said he objected to Burns' selection by the board to be one of three independent directors on a committee evaluating the Stanley deal.

As part of his compensation at the newly combined company, Archibald will earn an annual base salary of $1.5 million and up to $1.9 million in annual bonuses. He also will be eligible for stock options and awards, as well as a "cost synergy bonus" of up to $45 million if he meets certain goals by the end of his three-year contract. Shareholders will get 1.275 Stanley shares for each Black & Decker share.

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