SWK Completes HHI Divestment

Following Stanley Black & Decker, Inc.’s ( SWK - Analyst Report ) earlier communication of its decision to sell off its Hardware & Home Improvement Group (HHI), the industrial tool maker announced successful completion of the divestment deal with Spectrum Brand Holdings, Inc.

The transaction has been valued at $1.4 billion in cash or $1.3 billion of after-tax proceeds for Stanley Black & Decker. The company intends to use half of the sale proceeds for share repurchases, a portion for debt reduction and the remaining amount for reinvestment in suitable acquisitions.

The company found the long-term opportunities from HHI rather inconsistent with the objectives of the whole company and hence it decided that the sell-off would unlock resources blocked in this line of business. Free resources later will be utilized for creating long-term growth opportunities for the company.

HHI divestment will trigger a modest dilution in the range of 10-20 cents in earnings per share in 2013. This includes the impact of Stanley’s HHI divestment, share repurchases and Infastech acquisition. As far as 2012 is concerned, results will be adjusted to exclude HHI while free cash flow guidance was reiterated at $1.2 billion, exclusive of merger and acquisition charges.

Hardware & Home Improvement Group was acquired as part of the Black & Decker acquisition, completed in March, 2010. The business specializes in manufacturing residential locksets, residential builder’s hardware and plumbing fixtures. Major brands include Kwikset, Weiser, Baldwin, Stanley, National and Pfister brands, among others.

Acquisitions and divestments have been the company’s primary tools for progressing on a growth strategy of shifting its business portfolio toward its favored growth markets. Besides the strategic decision of selling off HHI, the company, in July 2012, agreed to acquire Hong Kong based leading manufacturer and supplier of specialty engineered fastening technologies, Infastech for $850 million in cash from CVC Capital Partners and Standard Chartered Private Equity Limited.

Stanley Black & Decker manufactures tools and engineered security solutions across the globe. Prime competitors of the company are Danaher Corp. ( DHR - Analyst Report ) , Makita Corp. ( MKTAY ) , and Snap-on Inc. ( SNA - Analyst Report ) . The stock currently bears a Zacks #4 (Sell) Rank.