Stanley Black & Decker and MTD Products
On September 12, Stanley Black & Decker (SWK) announced that it entered into a definitive agreement with MTD Products to acquire its 20% stake. Stanley Black & Decker said that it would pay $234 million in cash to acquire the 20% stake. The company also has the option to acquire MTD Products’ remaining 80% stake after July 1, 2021. The deal is expected to be completed in early 2019—subject to regulatory approvals.
The stake would likely enhance Stanley Black & Decker’s existing commercial relationship with MTD Products. The companies manufacture select outdoor products under the “Craftsman” brand. Stanley Black & Decker said that both of the brands will likely explore opportunities to generate revenue and cost synergies. The companies also plan to introduce new and innovative products and gain operational efficiency.
James M. Loree, Stanley Black & Decker’s president and CEO, said, “This investment in MTD increases our presence in the $20 billion global lawn and garden market in a financially and operationally prudent way. We have always viewed outdoor products as an attractive growth category for us to expand our presence beyond handheld electric products. This transaction gives us the opportunity to do that with a world-class partner. MTD has a first-rate management team, talented employees and a mission, values and commitment to innovation that are very closely aligned with our own, and we are excited to move forward with them.”
Stock price update
Investors appeared to approve the latest development. The stock gained ~6.6% and closed at $148.34 for the week ending September 14. The gains in the stock price caused a trend reversal in the 100-day moving average price. The stock traded 5.1% below the 100-day moving average price of $141.08. However, the stock is still down 12.6% on a year-to-date basis. Deere (DE) and Caterpillar (CAT) have declined 5.6% and 8.0%, respectively, while Honeywell (HON) has gained ~7.7%, respectively.
Stanley Black & Decker has a relative strength index of 62, 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.