Stanley Black & Decker To Acquire Craftsman Brand From Sears Holdings

(RTTNews) - Stanley Black & Decker (SWK) will purchase the Craftsman brand from Sears Holdings Corp. (SHLD), the two companies said Thursday. The transaction, which was approved by the boards of directors of both companies, is expected to close during 2017.

The transaction provides Stanley Black & Decker with the rights to develop, manufacture and sell Craftsman-branded products in non-Sears Holdings retail, industrial and online sales channels across the U.S. and in other countries.

As part of the agreement, Sears Holdings will continue to offer Craftsman-branded products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley Black & Decker, which will be royalty-free for the first 15 years after closing and royalty-bearing thereafter.

Under the terms of the deal, Stanley Black & Decker will pay Sears Holdings $525 million at closing, $250 million at end of year three, and annual payments on new Stanley Black & Decker Craftsman sales through year 15.

The net present value of all these cash payments is about $900 million. The license granted to Sears Holdings will be royalty-free for 15 years, then 3 percent thereafter.

The transaction is expected to be accretive to Stanley Black & Decker's earnings by approximately $0.10 to $0.15 per share in year one, increasing to approximately $0.35 to $0.45 by year five, and to approximately $0.70 to $0.80 by year ten, excluding approximately $20 million of deal-related costs.

Today, only approximately 10 percent of Craftsman-branded products are sold outside of Sears Holdings. The agreement will enable Stanley Black & Decker to significantly increase Craftsman sales in these untapped channels.

Stanley Black & Decker President and CEO James Loree said, "This agreement represents a significant opportunity to grow the market by increasing the availability of Craftsman products to consumers in previously underpenetrated channels. We intend to invest in the brand and rapidly increase sales through these new channels, including retail, industrial, mobile and online."