Yesterday Stanley Black & Decker, an S&P 500 company that makes tools and hardware, announced that it had entered into a definitive agreement to buy Infastech, a Hong Kong-based maker of rivets and engineered fasteners, from CVC Capital Partners and Standard Chartered Private Equity for $850 million.
Stanley Black & Decker, headquartered in New Britain, Connecticut, was formed in 2010 from the transatlantic merger of Stanley in the UK and Black & Decker in the US. Its main business is making products for the home improvement market, including hand tools, power tools, locks, alarm systems and fasteners. It has a market capitalisation of more than $10 billion and more than 44,000 employees worldwide.
Infastech had revenues in 2011 of approximately $500 million and about 2,000 employees, making it one of the world’s leading manufacturers of engineered mechanical fasteners and one of the biggest Asia-based players in the global fastener market. Infastech designs, manufactures and distributes highly engineered fastening technologies and applications for a diverse blue-chip customer base in the industrial, electronics, automotive, construction and aerospace markets. More than half of Infastech’s 2011 revenues were generated in Asia.
“There was strong strategic interest from the US and Japan,” according to an insider, “which shows there is desire for global strategics to continue to acquire platforms in Asia and enhance their emerging markets and Greater China exposure.”
But the pair-up with Stanley Black & Decker looked strong. Indeed, once combined with Emhart, Stanley Black & Decker’s fasteners platform, the enlarged business will generate close to 40% of its revenues from the region.
Sources say Infastech has some excellent relationships in electronics with folks like Apple, Nokia and Seagate and has developed some innovative products and technologies that Stanley can lever into its industrial and automotive businesses within Emhart.
“Infastech is both a highly accretive acquisition and a perfect strategic fit for Stanley Black and Decker,” said Black & Decker president and chief executive officer John Lundgren in a statement. “It adds to our strong positioning in specialty engineered fastening, an industry which has solid growth prospects particularly in the global electronics, industrial and automotive end markets, and will further expand our global footprint with its strong concentration in fast-growing emerging markets. In addition, Infastech’s diverse revenue base, strong margins, and solid financial track record make it a meaningful addition to our portfolio.”
Indeed, Stanley Black & Decker forecasts that the acquisition will help increase total company revenues from the emerging markets by approximately 16% this year and by more than 20% by 2015.
Drilling down further, if you will, the combined fasteners platform is expected to generate approximately half of its revenues from automotive manufacturing, a third from industrial fastening applications and 20% from high-growth verticals such as electronics. With the acquisition of Infastech, the engineered fastening platform will be the first of the company’s recently identified new growth platforms to achieve its mid-decade goal of $1 billion to $2 billion in revenue.
Stanley Black & Decker expects the transaction to result in annual cost savings of about $25 million by year three. The acquisition is also expected to give an immediate boost to the company’s earnings per share, with a rise of $0.15 a share in the first year after the transaction and $0.35 a share in the third year, excluding acquisition-related charges of $25 million to $30 million, which will largely be incurred in the first two years.
As for the sellers, a source said: “They had a good run of this, having bought it from a distressed seller a couple of years ago.” So the price and time was right to exit.
The deal is subject to customary closing conditions, including regulatory approvals, but it is expected to close in the fourth quarter of 2012.
Citi acted as exclusive financial adviser to Stanley Black & Decker in this transaction. Infastech was advised by Bank of America Merrill Lynch and Goldman Sachs.
Skadden, Arps, Slate, Meagher & Flom is legal adviser to Stanley Black & Decker.
