Just within a few days of its second quarter 2012 earnings release and floating of $750 million debentures, Stanley Black & Decker, Inc. (SWK) came up with yet another major announcement. This time it’s about an agreement to acquire Hong Kong based leading manufacturer and supplier of specialty engineered fastening technologies, Infastech.
The other parties involved in the transaction are CVC Capital Partners and Standard Chartered Private Equity Limited. The acquisition price has been settled at $850 million, all of which will be paid in cash by Stanley Black & Decker. Completion of the acqisition, which is still subject to approvals is expected to be in the fourth quarter 2012.
Infastech has a diversified client base in the industrial, electronics, automotive, construction and aerospace end markets in over 150 countries across the world. Well-known brands include Avdel®, ELCO® and iFormTM. Prime end markets for the combined business will include automotive manufacturing and electronics.
The acquisition will enhance Stanley’s revenue generation capacity as well as add around 2,000 employees to its workforce. Earnings accretion is expected immediately with roughly 15 cents in the first year of acquisition and 35 cents in the third year. It is anticipated that there would be annual cost savings of roughly $25 million by the third year while the first two years of acquisition will see $25-$30 million of acquisition related charges.
Acquisitions and divestments have been the company’s primary tools for progressing on a growth strategy of shifting its business portfolio toward favored growth markets. Infastech acquisition is likely to fulfill Stanley’s goal of generating above 20% revenue from the emerging markets. Infastech together with Stanley’s engineered fastening platform, Emhart are likely to generate 40% of their combined revenue in the Asia-Pacific region, which will likely push the overall company’s revenue generation from this region to 16%.
The current Zacks Consensus Estimate for the third quarter of 2012 is $1.46, representing a year-over-year increase of 9.09%. Estimates for the fiscal years 2012 and 2013 are $5.50 and $6.36, reflecting annual growth of 5.01% and 15.61%, respectively.
Stanley Black & Decker manufactures tools and engineered security solutions across the globe. Prime competitors of the company are Danaher Corp. (DHR), Makita Corp. (MKTAY), and Snap-on Inc. (SNA). The stock currently bears a Zacks #5 (Strong Sell) Rank.
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