Stanley Black & Decker, Inc. (NYSE:SWK), a tool company, is planning to purchase Newell Tools from Newell Brands Inc (NYSE:NWL) for $1.95 billion.
The $1.95 billion being spent by Stanley Black & Decker to acquire Newell Tools is from cash on hand and current debt. The company is expecting the deal to be 15 cents accretive to earnings per share in the first year after the purchase. It also expects this to increase to 50 cents per share by the third year.
SWK is expecting to incur between $125 million and $140 million in restructuring and other costs after the deal is complete. It is also looking at $40 million in non-cash inventory step-up charges. It believes most of these charges will affect the first and second year after the acquisition of Newell Tools.
Stanley Black & Decker will obtain the Irwin and Lenox power tools brands as part of the deal. It is expecting the brands to complement its own offers in the market. SWK is also looking for annual cost synergies of $80 million to $90 million in by three years after the acquisition.
Stanley Black & Decker says that the deal will also help expand its global footprint. This is possible with Newell Tools’ global manufacturing facilities and strong connections in its distribution networks. The company is expecting inorganic growth in the first year after the purchase and organic growth after that.
Stanley Black & Decker is currently expecting the deal to acquire Newell Tools to be completed in the first half of 2017. However, it still needs regulator approval and it also needs to complete other customary closing conditions before the deal closes.
SWK stock was up 2% and NWL stock was up 1% as of Wednesday morning.
