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Stanley Black (SWK) to Buy Sears Holdings' Craftsman Brand
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Industrial tool maker Stanley Black & Decker, Inc. (SWK - Free Report) recently announced that it has agreed to acquire the Craftsman tool brand from Sears Holdings Corporation (SHLD - Free Report) . The Craftsman brand complements the company’s global tools and storage brands as well as will open new business opportunities, especially in the lawn and garden end markets.
Post the release of third-quarter 2016 results on Oct 27, shares of the company yielded 2.9% return, underperforming the return of 7.4% generated by the Zacks categorized Machine Tools & Related Products industry.
Despite the underperformance by this Zacks Rank #4 (Sell) stock, we believe that Stanley Black & Decker’s latest acquisition is consistent with its strategic inorganic expansion policy. This buyout will allow the company to offer better and innovative products to customers in various operating regions as well as is indicative of the company’s strong balance sheet and healthy cash position.
Acquisition Deal Details
Brief on Craftsman: Sears Holdings’ Craftsman-branded products serve customers primarily in the tools (through hand and power tools), lawn & garden (through tractors and mowers as well as lawn & garden equipments) and storage/other (through storage & garbage and other products) end markets.
Currently, approximately 90% of retail sales of this product line are derived through Sears and Sears-related channels. This includes 65% sales through Sears, 20% from Sears Hometown and 5% from Kmart.
Financial Aspects of the Deal: Per the definitive agreement signed, Stanley Black & Decker has agreed to pay approximately $525 million at deal closing and thereafter disburse roughly $250 million at the end of three years of deal completion. In addition, the company will be annually paying roughly 2.5% of new Stanley Black & Decker Craftsman sales through 2020, 3% through Jan 2023, and 3.5% thereafter. An approximate net present value of these cash flows is $900 million.
Synergistic Benefits of the Deal: A diverse portfolio and product mix, along with the synergistic benefits of this acquisition, should help Stanley Black & Decker deliver solid results in the quarters ahead.
The company intends to enhance the availability of Craftsman products by increasing its distribution through non-Sears channels, preferably through retail, industrial, mobile and online. Also, the company might expand its manufacturing footprint in the U.S. for future expansion of the brand.
Upon closing of the transaction, Stanley Black & Decker will assume all the sales generated by selling Craftsman-branded products through non-Sears channels. Notably, in the past twelve months, revenues from such sources amounted to $200 million. In the next 10 years of deal closure, the company anticipates average annual revenue growth of approximately $100 million from the sale of Craftsman branded products. Earnings accretion of 10−15 cents per share is anticipated in year one, while approximately 35−45 cents are expected by year five and 70−80 cents by year 10. The earnings contributions exclude the impact of $20 million deal-related costs.
In addition, Sears Holdings will continue to source and distribute the Craftsman-branded products under a perpetual license granted by Stanley Black & Decker. The license will be royalty-free for the first 15 years, and will be charged at 3% thereafter.
Deal Closing: Subject to satisfaction of pending regulatory and other approvals, Stanley Black & Decker anticipates closing the transaction during 2017.
Stocks to Consider
Stanley Black & Decker has a market capitalization of $17.8 billion. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased 1.6% to $6.93 per share for 2017. However, this estimate reflects year-over-year growth of 6.90%.
A couple of better-ranked stocks in the machinery industry include Actuant Corporation and Kennametal Inc. (KMT - Free Report) . While Actuant Corporation sports a Zacks Rank #1 (Strong Buy), Kennametal Inc. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Actuant Corporation’s earnings estimates for fiscal 2017 and fiscal 2018 improved over the last 60 days. It has an average positive earnings surprise of 11.47% for the trailing four quarters.
Kennametal Inc. has a positive average earnings surprise of 14.45%. Also, earnings estimates fiscal 2017 and fiscal 2018 have improved over the past 60 days.
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Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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Stanley Black (SWK) to Buy Sears Holdings' Craftsman Brand
Industrial tool maker Stanley Black & Decker, Inc. (SWK - Free Report) recently announced that it has agreed to acquire the Craftsman tool brand from Sears Holdings Corporation (SHLD - Free Report) . The Craftsman brand complements the company’s global tools and storage brands as well as will open new business opportunities, especially in the lawn and garden end markets.
Post the release of third-quarter 2016 results on Oct 27, shares of the company yielded 2.9% return, underperforming the return of 7.4% generated by the Zacks categorized Machine Tools & Related Products industry.
Despite the underperformance by this Zacks Rank #4 (Sell) stock, we believe that Stanley Black & Decker’s latest acquisition is consistent with its strategic inorganic expansion policy. This buyout will allow the company to offer better and innovative products to customers in various operating regions as well as is indicative of the company’s strong balance sheet and healthy cash position.
Acquisition Deal Details
Brief on Craftsman: Sears Holdings’ Craftsman-branded products serve customers primarily in the tools (through hand and power tools), lawn & garden (through tractors and mowers as well as lawn & garden equipments) and storage/other (through storage & garbage and other products) end markets.
Currently, approximately 90% of retail sales of this product line are derived through Sears and Sears-related channels. This includes 65% sales through Sears, 20% from Sears Hometown and 5% from Kmart.
Financial Aspects of the Deal: Per the definitive agreement signed, Stanley Black & Decker has agreed to pay approximately $525 million at deal closing and thereafter disburse roughly $250 million at the end of three years of deal completion. In addition, the company will be annually paying roughly 2.5% of new Stanley Black & Decker Craftsman sales through 2020, 3% through Jan 2023, and 3.5% thereafter. An approximate net present value of these cash flows is $900 million.
Synergistic Benefits of the Deal: A diverse portfolio and product mix, along with the synergistic benefits of this acquisition, should help Stanley Black & Decker deliver solid results in the quarters ahead.
The company intends to enhance the availability of Craftsman products by increasing its distribution through non-Sears channels, preferably through retail, industrial, mobile and online. Also, the company might expand its manufacturing footprint in the U.S. for future expansion of the brand.
Upon closing of the transaction, Stanley Black & Decker will assume all the sales generated by selling Craftsman-branded products through non-Sears channels. Notably, in the past twelve months, revenues from such sources amounted to $200 million. In the next 10 years of deal closure, the company anticipates average annual revenue growth of approximately $100 million from the sale of Craftsman branded products. Earnings accretion of 10−15 cents per share is anticipated in year one, while approximately 35−45 cents are expected by year five and 70−80 cents by year 10. The earnings contributions exclude the impact of $20 million deal-related costs.
In addition, Sears Holdings will continue to source and distribute the Craftsman-branded products under a perpetual license granted by Stanley Black & Decker. The license will be royalty-free for the first 15 years, and will be charged at 3% thereafter.
Deal Closing: Subject to satisfaction of pending regulatory and other approvals, Stanley Black & Decker anticipates closing the transaction during 2017.
Stocks to Consider
Stanley Black & Decker has a market capitalization of $17.8 billion. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased 1.6% to $6.93 per share for 2017. However, this estimate reflects year-over-year growth of 6.90%.
STANLEY B&D INC Price and Consensus
STANLEY B&D INC Price and Consensus | STANLEY B&D INC Quote
A couple of better-ranked stocks in the machinery industry include Actuant Corporation and Kennametal Inc. (KMT - Free Report) . While Actuant Corporation sports a Zacks Rank #1 (Strong Buy), Kennametal Inc. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Actuant Corporation’s earnings estimates for fiscal 2017 and fiscal 2018 improved over the last 60 days. It has an average positive earnings surprise of 11.47% for the trailing four quarters.
Kennametal Inc. has a positive average earnings surprise of 14.45%. Also, earnings estimates fiscal 2017 and fiscal 2018 have improved over the past 60 days.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>