Stanley Black & Decker Buying Craftsman Brand From Sears

Stanley B&D expects the deal, valued at $900 million, to generate about $100 million of annual sales growth for approximately the next 10 years.

As has been rumored for months, Stanley Black & Decker will purchase the Craftsman brand from Sears Holdings for a deal valued at some $900 million. 

The agreement consists of $525 million cash payment at closing, $250 million at end of year three, and annual payments to Sears Holdings of between 2.5-3.5 percent on new Stanley Black & Decker sales of Craftsman products through year 15. The net present value of all these cash payments is approximately $900 million, Stanley said. The license granted to Sears Holdings will be royalty-free for 15 years, and then 3 percent thereafter. 

The deal is expected to be completed this year. The boards of both companies have approved the agreement.

Existing sales of Craftsman products outside the Sears Holdings and Sears Hometown distribution channels, which will be assumed immediately upon closing by Stanley Black & Decker, were approximately $200 million over the last 12 months. Stanley expects the sale of Craftsman branded products to contribute approximately $100 million of average annual revenue growth for approximately the next 10 years.    

The transaction provides Stanley Black & Decker with the rights to develop, manufacture and sell Craftsman-branded products in non-Sears Holdings retail, industrial and online sales channels across the U.S. and in other countries. 

As part of the agreement, Sears Holdings will continue to offer Craftsman-branded products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley Black & Decker, which will be royalty-free for the first 15 years after closing and royalty-bearing thereafter. 

Stanley says the deal means that it will expand its manufacturing footprint in the U.S. and create hundreds of jobs. The company, which has been in an acquisition mode, has increased the number of its manufacturing employees by 40 percent in the past three years.

Today only approximately 10 percent of Craftsman-branded products are sold outside of Sears Holdings and the agreement will enable Stanley Black & Decker to significantly increase Craftsman sales in untapped channels.

“Craftsman is a legendary, American brand with tremendous consumer awareness built on a legacy of producing quality products at a great value," said Stanley Black & Decker President and CEO James M. Loree. "This agreement represents a significant opportunity to grow the market by increasing the availability of Craftsman products to consumers in previously underpenetrated channels. 

“We intend to invest in the brand and rapidly increase sales through these new channels, including retail, industrial, mobile and online. As we continue our growth trajectory as a diversified industrial company, we continue to look at opportunities to build upon our world-class portfolio of franchises and brands to create shareholder value. This transaction, which aligns squarely with this strategy, also reflects an effective allocation of capital particularly when viewed in the context of the recently announced Mechanical Security sale.  We've essentially freed up capital trapped in a low-growth business to invest in organic growth and EPS accretion," added Loree.

In 2012, Stanley sold its hardware and home improvement unit to Spectrum Brands Holdings for $1.4 billion in cash, as the company worked to reduce its product portfolio. Spectrum, which owns Rayovac batteries and George Foreman grills, will be acquiring a maker of locksets and residential faucets.

Stanley also announced this past fall that it was acquiring the Tools business of Newell Brands, which includes the industrial cutting, hand tool and power tool accessory brands, Irwin, Lenox and Hilmor brands for $1.95 billion.

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