Stanley Works buys rival Black & Decker

       Stanley Works struck a deal to buy rival Black &Decker Corp for $3.46 billion in stock,combining a top hand tool maker and power tool maker to benefit from higher margins and cost savings.
       The companies said the driving motivation of the deal is the $350 million in annualised cost savings as well as the improved finances of the more diversified company.
       Our lines complement each other,Black & Decker chief executive Nolan Archibald said in an interview.From a product point of view and a geographic point of view we have an opportunity of putting these two organisations together and coming up with significant cost savings.
       Black & Decker shareholders will receive 1.275 Stanley shares about $57.56 at Mondays close for each Black & Decker share they own, representing a premium of 22% over Black & Deckers Monday close of $47.34. Stanley shareholders will own about 50.5% of the combined company, with Black & Decker shareholders owning the rest.
       Stanley chief executive John Lundgren said that cost savings would come from business unit and regional consolidation, corporate overhead cuts, and changes to manufacturing,distribution and purchasing practices.
       He said job cuts would be modest.Certainly it will be less than 10%this is nothing draconian, Lundgren
       said in an interview.
       The CEOs said they did not expect anti-trust problems.While the two companies are both top tool makers, Black & Decker is focused on power tools while Stanley Works is a top hand tool maker.
       Brian Sozzi, an analyst at Wall Street Strategies, said the deal makes strong sense.
       A deal would help them get positioned ahead of the recovery in housing and the ultimate rebound in commodities, Sozzi said.
       The deal is expected to add about $1 per share to the earnings of the combined company, Stanley Black &Decker, by the third year after closing.
       The companies also expect about $1 billion in free cash flow from the com-bined businesses by the end of the third year.
       With a billion dollars in cash flow,our combined business development team and a very full acquisition pipeline gives us the opportunity to continue to build the growth platforms that are out there, Lundgren said.
       He said growth areas included security,engineered fastening, infrastructure and health care.
       James Lucas, an analyst at Janney Montgomery Scott, said that Stanley has recently developed into a much stronger operating company than in years past and that expertise could create value at the Black & Decker brands as the companies move forward.
       Stanley Works Lundgren will be CEO of the combined company, while Black & Deckers Archibald will be chairman for three years.