Stanley Works/Black & Decker

2 03 2010

As I said in an earlier post, I purchased $2,005.00 worth of Stanley Works (SWK) at $47.50 a share a couple years ago. Now that the Black & Decker/Stanley Works merger is about to go through, I think it’s a good idea to take another look at the valuation of these companies and what the merger will do to me as a shareholder.

According to the Stanley Work’s 10-k:

Under the terms of the transaction, which has been approved by the Boards of Directors of both companies, Black & Decker shareholders will receive a fixed ratio of 1.275 shares of the Company’s common stock for each share of Black & Decker common stock they own. Based on the $52.47 closing price of the Company’s common stock on January 27, 2010, the consideration to be received by Black & Decker shareholders represents $66.90 per Black & Decker share, or approximately $4.2 billion in aggregate value. Upon closing, it is expected that the Company’s shareholders will own approximately 50.5% of the equity of the combined company and Black & Decker shareholders will own approximately 49.5%.

I’ll basically be left holding half of Stanley, and half of BDK. So what is each worth?

Using my attached spreadsheets, I’ve concluded that  Stanley is worth somewhere between $5 and $6 billion, while Black & Decker is worth somewhere around $5 billion. That means I’ll be left holding half of a business worth $10-11 billion. Right now, the combined market cap of both companies is $9.4 billion. That’s not much of a margin of safety! I think I’ll take my money elsewhere.

EDIT: I’ll put up the spreadsheets when I can figure this damn hosting thing out.

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