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SWK Completes Acquiring Infastech

Zacks Equity Research

Machine tools and accessories maker, Stanley Black & Decker, Inc. (SWK) successfully completed acquiring Infastech on February 27, 2013 from CVC Capital Partners and Standard Chartered Private Equity Limited for a total cash consideration of $850 million.

The transaction was originally announced on July 23, 2012. Infastech is one of the leading manufacturers and suppliers of specialty engineered fastening technologies in Hong Kong. It has a diversified client base in the industrial, electronics, automotive, construction and aerospace end markets in over 150 countries across the world. The company’s well-known brands include Avdel®, ELCO® and iFormTM; its prime end markets for the combined business will include automotive manufacturing and electronics.

The acquisition will enhance Stanley’s revenue generation capacity as well as add around 2,000 employees to its workforce. Earnings accretion is expected immediately with roughly 20 cents in 2013 and 40 cents by 2015. It is anticipated that there would be annual cost savings of roughly $25 million by 2015 while the first two years of acquisition will see roughly $30 million of acquisition related charges.

Historically, acquisitions and divestments have been the company’s primary tools for progressing on a growth strategy of shifting its business portfolio toward favored growth markets. The recent Infastech acquisition is, therefore, likely to fulfill Stanley’s goal of generating above 20% revenue from the emerging markets. Infastech together with Stanley’s engineered fastening platform, Emhart, is likely to generate 40% of their combined revenue in the Asia-Pacific region, which will likely push the overall company’s revenue generation from this region to 16%.

The current Zacks Consensus Estimate for the first quarter of 2013 is $1.02, representing a year-over-year decline of 6.8%. Estimates for 2013 and 2014 are $5.50 and $6.37, reflecting annual growth of 17.7% and 15.8%, respectively.

Stanley Black & Decker currently carries a Zacks Rank #5 (Strong Sell). Other stocks to watch out for in the industry are Sandvik AB (SDVKF), holding a Zacks Rank #1 (Strong Buy) along with Atlas Copco AB (ATLKY) and Kaydon Corporation (KDN), both holding a Zacks Rank #2 (Buy).

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