Imperial Capital Remains Sidelined as Stanley Black & Decker (SWK) Acquires Newell Tools
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Imperial Capital reiterated an In-Line rating and $125.00 price target on Stanley Black & Decker (NYSE: SWK) following the company's acquisition of Newell Tools. The transaction is expected to close during 1H17, and Stanley expects the acquisition to be $0.15 accretive to EPS in year one post-closing, and increase to $0.50/share by year three.
Analyst Jeff Kessler commented, "Acquisition of Newell Brands’ Tools business supports our thesis that Stanley can supplement its organic growth with highly strategic and accretive acquisitions. In our research report dated 7/25/16, we wrote that Stanley could be active in the M&A market and grow inorganically while maintaining its leverage ratio, if parts of the security division are divested. On 10/12/16, Stanley announced that it signed a definite agreement to acquire the Tools business of Newell Brands (NWL) for $1.95bn in cash. LTM revenues for Newell Tools was about $760mn, and LTM EBITDA was $150mn, valuing the transaction at 13x LTM EBITDA, we estimate. After accounting for annual cost synergies that Stanley expects by year three of the closing, the post-synergy transaction is valued at 8x LTM EBITDA. We note that management has a history of meeting or exceeding its own synergy targets."
Shares of Stanley Black & Decker closed at $120.23 yesterday.
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