NEW YORK -- Tool company Stanley Black & Decker Inc. is buying Newell Brands' tools division for $1.95 billion in cash.
The unit includes the industrial-cutting, hand-tool and power-tool accessory brands Irwin and Lenox.
Shares of both companies rose in trading Wednesday.
Newell Brands Inc. announced recently that it will be selling several divisions as part of a consolidation move. The move to sell businesses with annual sales of about $1.5 billion comes a year after the company bought Jarden Corp. for about $13 billion and Elmer's for $600 million.
The acquisition tightens Stanley's grip on the tool market at a time of industry upheaval. Sears Holdings Corp. also has been shopping around its Craftsman tool division, which may fetch about $2 billion as well, according to people familiar with the situation. Stanley has expressed interest in that business, too, the people said earlier this month.
Newell Brands said the consolidation move will transform it from a holding company to an operating company with a new set of investment priorities and a sharpened portfolio. It will consolidate its existing 32 business units to 16 operating divisions. Atlanta-based Newell Brands said that it hopes to complete the sales within the first half of 2017.
"This is a big strategic step by management to quickly clean up the portfolio to allow it to focus on its best growth and margin opportunities," Bill Schmitz, an analyst for Deutsche Bank, said in a research note.
The transaction between Newell Brands and Stanley Black & Decker is anticipated to result in annual cost savings of about $80 million to $90 million for Stanley Black & Decker by the third year after closing.
The buyout is expected to add approximately 15 cents per share to earnings in the first year after the deal closes, rising to about 50 cents per share by the third year. This excludes about $125 million to $140 million of restructuring and other acquisition-related costs and approximately $40 million in inventory-related charges.
This is Stanley Black & Decker's first major acquisition since 2013, President and Chief Executive Officer James Loree said in a written statement Wednesday.
The transaction is expected to close in the first half of 2017.
Stanley Black & Decker is based in New Britain, Conn. Its stock rose $3.39, or 2.9 percent, to close Wednesday at $121.05. Shares of Newell Brands rose $1.08, or 2.2 percent, to close at $51.42.
"Our priority is to create brands that resonate with our consumers and create value for our shareholders, ones that have tremendous growth potential and that are responsive to innovation," Newell Chief Executive Officer Mike Polk said in an interview. That means focusing on other areas, such as its writing, home-fragrance and baby-gear products, he said.
Information for this article was contributed by Nick Turner and Matt Townsend of Bloomberg News.
Business on 10/13/2016