The Stanley Works, New Britain, CT, has made a firm offer to purchase Facom Tools from Fimalac for euro 410 million ($494 million) in cash. The deal would almost double the size of Stanley's European hand tools business. Facom Tools, with 2004 sales of euro 370 million ($445 million) and LTM (last twelve months) operating profit of approximately 12%, includes the professional tool brands Facom, Usag (Italy) and Virax (plumbing tools), among others.
The proposed transaction is subject to certain regulatory approvals and other customary conditions, including consultation with Facom's labor representatives, which must be completed prior to the acceptance of the offer by Fimalac. Assuming successful completion of this process, closing is expected to occur by year-end 2005 or shortly thereafter.
"This is an ideal acquisition to enhance our Tools growth platform with excellent strategic and financial benefits," said John F. Lundgren, chairman and CEO. "Facom is one of the preeminent professional hand tools companies in Europe and, as such, is one of the most attractive tool franchises in the world. Facom, with its focus in industrial and automotive tools in Europe, is a 'hand-in-glove' fit with our existing European hand tools business, which is strong in the D-I-Y and construction channels.
"This acquisition will add well-established professional brands to our portfolio and further diversify our customer base. It will give us a global market position in industrial and automotive tools that will enable us to serve our relatively stable local markets competitively and effectively while following our customers as they pursue growth strategies in developing markets such as Eastern Europe, China, India and other parts of Asia. Further, we expect to be able to introduce selected products from Stanley's formidable, but North American-centric, industrial tools business into Facom's distribution channels as well as benefit from Facom's impressive array of innovative products, some of which may be sold into our North American markets."
"Stanley has an outstanding track record of creating value through acquisitions," Mr. Lundgren continued. "By combining businesses in the past, we have been able to achieve substantial sourcing cost reductions and production efficiencies with the help of the Stanley Fulfillment System. At the same time, we have reduced SG&A expenses and eliminated redundancies, while maintaining a sharp focus on organic growth and building out our growth platforms in Tools and Security Solutions. We will draw upon these proven capabilities in integrating Facom Tools.
"By almost doubling the size of our European operations, we will have greater scale, which should enhance the profitability of the combined enterprise. Both Facom's senior management and our European team have demonstrated the ability to create economic value. The retention of key members of both teams is a major positive that gives us a high level of confidence that targeted benefits will be realized."
James M. Loree, Executive Vice President and CFO, added, "The addition of Facom has very positive implications for our total company financial outlook in the coming years and thus for the creation of shareowner value. This transaction positions us to be a $4 billion company in revenues, with operating margins between 15% and 16% by 2007. Even after taking into consideration the effect of acquisition-related charges, our fully-diluted EPS should be well in excess of $4 by 2007."
The company expects to fund this acquisition through existing cash resources and debt, with the intention of preserving its current upper-tier investment grade credit ratings.