After announcing an agreement to purchase the Craftsman Brand from Sears for $900 million on Thursday, Stanley Black & Decker now says it will construct a new $35 million hi-tech factory in the U.S. to expand the Craftsman tool line.
The company did not provide further information as to the location during a conference call with analysts. However, the decision is considered a move to prevent Stanley Black & Decker from a “border tax” or tariff that has been threatened by President-elect Donald Trump.
Trump has warned companies such a tax could be imposed on companies that relocate to other countries to make products and then sell those products back in the U.S.
Stanley Black & Decker CEO James Loree did not mention Trump during the conference call.
He did say, however, that U.S. manufacturing capacity made "business sense" and was close to his company's philosophy "to make where we sell whenever possible” whether that is in the U.S. or any other country. where Stanley has a presence. Many end users prefer to buy products that are produced in their own countries, he said.
He also called the Craftsman deal an opportunity to “re-Americanize and revitalize” the brand.
The sale means that Stanley Black and Decker would make avalable Craftsman products through its existing industrial and construction distribution channels, Loree said.
Stanley Black and Decker, which has some 30 manufacturing plants in the U.S., has increased the number of manufacturing employees by 40 percent in the past three years. It currently has about 3,000 domestic production workers.
“We already manufactured many products cost-effectively in this country and in some cases, we’ve been able to bring manufacturing back to the U.S. at a lower cost than producing overseas,” he said.
Loree pointed out added that the tool market is “incredibly fragmented and the competition, particularly the hand tool market is brutal,” noting that “there is a lot of room for acquisitions in the tool business.”
Stanley Black and Decker says it will be looking to grow its relationships with Lowe’s and Home Depot as well as professional tool distributors to expand the reach of the Craftsman brand. About 90 percent of Craftsman sales now occur at Sears, Sears Hometown and Kmart stores. Ace Hardware stores account for much of the remaining 10 percent of sales. Loree said he expects sales of Craftsman tools could expand markedly through Stanley’s exisiting industrial distribution channels.
Stanley has been one of the most active acquirers of companies for many years. The company, which dedicates half of its excess capital to acquisitions, has made more than 100 acquisitions in the past 15 years. Its biggest purchase came in In 2009 when Stanley Works acquired Black & Decker Corp. for $4.5 billion in stock, combining two of the country’s largest U.S. hand-tool and power-tool makers. After that purchase, Stanley Black and Decker had been in a self imposed hiatus from further acquisitions.
But Loree has made it clear that era is over. Five years ago, Stanley Black & Decker bought Hong Kong-based fastener manufacturer Infastech for $850 million in cash. Last October, Stanley paid $1.95 billion for Newell Brands’s tools business, including Irwin and Lenox, the industrial-cutting, hand-tool and power-tool accessory brands. Those moves marked significant bids for Stanley’s growth in the global tools industry.
“The tool market, particularly the hand tool market…has been brutal,” Loree said. “There is a lot of room for acquisitions.”
Loree emphasized that Stanley Black and Decker intends on growing as a “diversified industrial company,” not just a tool company noting that its recent tool acquisitions have occurred because of their value and oppportunity for growth.
Craftsman is an icon in the tool industry. Sears bought Craftsman in 1927 for $500 and the company is known for its lifetime warranty of products. Craftsman produces a varety of tools including wrenches, hand tools, tool chests and many other products.
The deal also offers Stanley a significant expansion into business lines not related to hand tools, power tools or hardware. The bulk of Craftsman’s sales, more than 60 percent, comes from lawn-and-garden equipment and other product lines that Stanley currently has no presence in.
Stanley officials said the purchase will give them an entree into that $12 billion market.
The deal could also mean $100 million in additional revenue annually for Stanley Black & Decker over the next 10 years, Loree said.