Stanley Black & Decker (SWK) announced the acquisition of CRC-Evans International for roughly $445 million in a cash transaction from a consortium of investors led by Natural Gas Partners, a private equity firm. CRC-Evans International, with approximately $250 million revenue in fiscal 2010, is a leading supplier of specialized tools, equipment and services for the construction of oil and natural gas transmission pipelines.
The acquisition will be funded from the company’s existing liquidity amounting to approximately $1,598.4 million at the end of the second quarter of 2010. There will be no increases in debt levels by the end of the year.
CRC-Evans acquisition establishes Stanley Black & Decker in a growing global oil and natural gas infrastructure industry, with the US pipeline construction expected to soar to 5,441 miles by 2011. Operating within the Industrial segment, the acquisition will be immediately accretive to earnings and add 10 cents to EPS over three years of acquisition. The company also expects to realize $5 million in cost synergies over three years, with roughly $1 million in the first full year.
Stanley Black & Decker’s emphasis is on growing within its core and five strategic growth platforms including Convergent Security, Mechanical Security, Engineered Fastening, Infrastructure and Healthcare. The company intends to grow its infrastructure platform to roughly $1 billion to $2 billion in over 5 to 7 years with prime areas of focus being specialized tools, equipment and services for commissioning, repair and maintenance of infrastructure in areas such as oil and gas, transportation, water and sewer, and power systems.
Stanley Black & Decker manufactures tools and engineered security solutions across the globe. Prime competitors of the company are Danaher Corp. (DHR), Makita Corp. (MKTAY), and Snap-on Inc. (SNA). We currently maintain our Neutral recommendation on the stock, supported by Zacks #3 (Hold) Rank.
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