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Stanley Black & Decker to Acquire IES Attachments Business

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New acquisition

On August 7, Stanley Black & Decker (SWK) announced that it signed a definitive agreement to acquire International Equipment Solutions Attachments Group. The deal is valued at ~$690 million in cash. Stanley Black & Decker is expected to fund the acquisition through cash in hand and proceeds from borrowings. However, the company didn’t state when the acquisition will be complete.

IES Attachments manufactures heavy equipment tools for off-highway applications including brands like Paladin, Genesis, and Pengo. Stanley Black & Decker could integrate the business with its hydraulic tools business in the industrial segment. Stanley Black & Decker expects the business to contribute towards the EPS in 2019. The business could generate an EPS of ~$0.25–$0.30 by the third year.

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Stanley Black & Decker’s president and CEO, James M. Loree, said, “The acquisition of IES Attachments further diversifies our presence in the Industrial markets, creates an additional well-defined path for continued profitable growth and delivers compelling cash flow returns. Consistent with our long-term capital allocation strategy, we continue to deploy a balanced approach, capitalizing on both M&A and opportunistic share repurchases. These actions announced today underscore our confidence in our ability to create long-term shareholder value as we continue our pursuit of the 22/22 vision.”

In another development, Stanley Black & Decker completed a $300 million share, which takes the total share repurchases to $500 million in 2018.

Stock price update

On August 7, Stanley Black & Decker was up marginally. For the week ending August 10, the stock ended ~3.6% down and closed at $139.24. The decline in the stock price caused a trend reversal in its 100-day moving average price. The stock traded 2.9% below the 100-day moving average price of $143.41. However, analysts are bullish on the stock with a target price of $177.40, which implies a return potential of 27% over the closing price as of August 10.

On a year-to-date basis, Stanley Black & Decker has declined 17.4%, while Deere (DE), Caterpillar (CAT), and Honeywell (HON) have fallen 13.25%, 13.75%, and 0.4%, respectively.

Stanley Black & Decker has a relative strength index of 45, which indicates that the stock isn’t overbought or oversold. Investors could hold Stanley Black & Decker indirectly by investing in the Invesco DWA Consumer Staples Momentum ETF (PSL), which has invested 2.6% of its portfoli0 in Stanley Black & Decker.

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