Stanley Black & Decker, relatively new owner of the Craftsman tool brand – which they paid $900 million for in a complicated deal – has recently acquired Consolidated Aerospace Manufacturing LLC (CAM), for “up to $1.5 billion.”
What is so special about CAM that Stanley Black & Decker acquired it for so much more money than Craftsman, perhaps the broadest, most well-known, and maybe even once most-popular American tool brand?
Advertisement
The initial acquisition news, back in January 2020, said that CAM was acquired from an investment firm Tinicum. CAM manufacturers fasteners and other components for the aerospace industry.
In their most recent investor presentation materials, Stanley Black & Decker says that:
CAM is an ideal Bolt-On to Engineered Fastening
The Bolt-On part seems unintentional, but struck me as interesting, as that’s the line of modular Craftsman 20V Max cordless power tools that Stanley Black & Decker manufactured for Sears.
Here are some bullet points from the same presentation materials:
Industry Leading Manufacturer Of Specialty Fasteners & Components
For The Aerospace & Defense End Market (~$375M LTM Revenue)
-
Increases Scale In High Growth, High Margin Aerospace & Defense Segment And Creates A Pathway For Profitable Growth
-
Purchase Price Up To $1.5B | $0.2B Contingent On The Certification & Production Levels Of 737 MAX
-
Adjusted For ~$185M Of Expected Cash Tax Benefits, The Net Transaction Value Is ~$1.1 – $1.3 Billion
-
Year 3 EPS Accretion ~$0.30 – $0.40 | Year 5 CFROI ~12%
Unfortunately, I don’t know what any of this means. Well, I know what it means, I just don’t understand the significance.
Stanley Black & Decker acquired a company, something that happens all the time, and they expect to earn money back from the investment over time.
They also expect for CAM to create a pathway for profitable growth. With the acquisition of Craftsman, I can see – and we have seen – paths to growth. When Stanley Works and Black & Decker merged, it made sense for the two very complementary tool brands to come together.
Stanley Black & Decker owns Powers Fasteners, whose products are now marketed under Dewalt Engineered by Powers branding.
What are the pathways for growth for a brand like Stanley Black Decker in the aviation fastener and component industry? Perhaps this will be an opportunity for “synergistic” efforts that includes their Proto tool brand? We shall see.
Gary
With Craftsman, they bought a NAME with minimal revenues and cash flows (primarily those associated with Ace) … Sears retained its revenues.
The CAM acquisition is a business with revenues … same as the Newell acquisition.
Stuart
True – and the Irwin/Lenox/Vise-Grips acquisition was $1.95 billion.
https://toolguyd.com/stanley-black-decker-bought-irwin-lenox-tool-brands/
Aaron
I love how Porter-Cable is one of the first names under “well-managed brands” when they’re the most listless and irrelevant of all the well-known power tool companies out there.
BobM
Same for Black & Decker.
Mark S.
I agree with Porter Cable becoming irrelevant but Black and Decker still has some sway among older DIY folks. PC used to be great woodworking tools but after their 18v power tools faded in favor of the 20v, PC seems lost.
dstblj52
Black and Decker makes cheap crap but they make profitable and we’ll priced cheap crap so i would say they are well managed
Pat
Black and Decker is a brand that in the past has been bleed dry. I detect a bit of re-positioning upward in the market. It will take at least 3 to 5 years for Stanley to bring respect to the B&D line. Don’t forget their Dustbuster is an industrial leader quality product.
Another Jeff
I still don’t get their thought process in buying Craftsman. The only people who think well of that name are in the same target market as that of the Coronavirus. They’ve obviously poured a ton of money into rebuilding it, but I personally think they’d have been better off just starting a new brand and spent that 900M (and gosh only knows how much they’ve paid Lowe’s to cover their stores in Craftsman tools) on building it. I mean, how hard is it to start a new brand with mediocre tools?
Nils
Maybe nostalgia, my folks weren’t mechanics but I can’t remember how many times I’ve heard from gramps, dad and uncles not to throw away craftsman stuff because they’ll replace it.
Ron
You might not agree with it, but they are making a lot of money from it.
Mahalo
It’s not about how “hard” it is to start a new brand so much as how “easy” it is to work with a known brand name. People walk into Lowe’s now, and they see Kobalt (who?) next to Craftsman. The products look about the same and are both in the homeowner range of capability and affordability. They then reach for the Kobalt. Just kidding.
Diplomatic Immunity
> People walk into Lowe’s now, and they see Kobalt (who?) next to Craftsman. The products look about the same and are both in the homeowner range of capability and affordability. They then reach for the Kobalt. Just kidding.
Depends on the age of the person. Some old timer sure. But don’t put it past someone that had to deal with later Sears Craftsman to reach for the Kobalt instead.
Anthony G.
Stanley owns Kobalt also
Stuart
No they don’t.
Stephan p
No they dont lowes own kobalt….
Anthony G.
They bought it from Lowes .
Anthony G.
I appologize. They are made at the same factory in China as craftsman.
Jerry J Thomes
Would still go for Craftsman tools best bang for your buck as a mechanic and construction worker it’s what the majority of toolbox is.
Anthony G.
They are both owned by Stanley Back and Decker now so it probably don’t matter.
Mike
Kobalt is exactly what I would be reaching for.
John
Who walks into over priced disorganized Lowe’s
John
It is hard to start a new brand. You can make up a name and create product, but if you can’t get a major retailer to list them in the store then your brand will fail. Craftsman still is the #1 most recognized tool brand among consumers. That translates into retailers really, really, really wanting the products on their shelves.
Diplomatic Immunity
I didn’t understand it either aside from name recognition. The problem is I already associated the brand name to be that of garbage to begin with since Sears pretty much dragged the name through the mud over the years. Goes for the same thing with SBD and the Black and Decker name for me. I associate the specific Black and Decker brand with garbage for the most part.
Was there a time where both brands were associated with quality… sure…. I guess. But when was that? How many decades ago? What are the age of the people that remember that time period?
Charles
Yes to Diplomatic Immunity. I feel the same way about Craftsman now. Sears spent roughly twenty (thirty?) years destroying the quality of Craftsman tools so now I walk past the Craftsman display at Lowes and assume (correct me if I’m wrong) that the stuff is no better or different than most bottom of the line no-name brands. Well, maybe a little bit better but I will never know because I will be buying Milwaukee or Bosh for the few tools I still need to purchase.
Tom
Makes sense. Prior to the disruptions in global travel and trade, aerospace is one of the fastest growing industrial segments in North America, which is SBD’s core market. Because it’s so hard to get components spec’ed in for aerospace and military/defense contracts, you enjoy less competition and higher profit margin. This acquisition gives SBD better diversification across end user vertical markets and protects them from slowdowns in other areas where they are heavily exposed (i.e. residential construction, industrial/commercial construction, oil & gas, etc.). It’s also a natural extension of their existing engineered fastening business, giving them more scale in that market.
Martin
SBD’s core business is power tools not industrial fastening.
Tom
True, tool and storage is the largest of their segments. But they have two other major business units: security (access technologies) and industrial (engineered fastening, pipeline services, and tools for major infrastructure products). They own a lot of brands and make a lot of stuff you wouldn’t expect.
https://www.stanleyblackanddecker.com/our-businesses/industrial
https://www.stanleyblackanddecker.com/our-businesses/security
Dave P
One potential risk is that management will get distracted from their core power tools business and then companies with focus (e.g. Milwaukee and Makita) will take more market share. I own multiple brands of tools, but see Milwaukee taking a bigger share because of their intense focus on trades people and the proliferation of tools for every specialty. Milwaukee’s mission is to make every job site cordless. SBD’s mission seems unfocused to me.
Steve
Ditto
Scared toolnut
Scared at idea that aerospace aviation fasteners are going to be fabricated to the craftsman level of quality. Don’t worry about a hijack the parts will fall of on their own. Heck I fly a lot for work and am now more scared
aerodawg
In the past I’ve heard 1.5X to 2X revenue or book value of a company as purchase price. The price of aerospace components, even nuts bolts and screws, being what it is due to the certification and book keeping requirements, $750M to $1B a year isn’t out of line for either annual revenue or book value isn’t out of line….
TimL
The one thing my mind thought of; (tangent?) space force! Maybe they are predicting equipment and hardware will be in demand, and are speculating this acquisition can get them involved early and build revenue.
Brian J Collins
I cant wait for Stanley to make the tools and fasteners for upcoming NASA missions so one of our astronauts can accidentally let a tool and fastener go while on a space walk repair mission. Talk about building a brand with a new demographic – ETs !
Nathan
Don’t know if many know this but one of the reason black and decker was the first company on the market with a cordless drill is because in the 60’s they were the company chosen to partner with NASA on the moon core sample drills and other bits.
fred
I always thought that I was Bosch that introduced the first cordless drill – in 1978.
Meanwhile – it was Makita that seemingly brought a batch of early-adopter cordless drills to the US market – making a pretty good dent with their 9.6V NiCad tools. The first batch of cordless drills that I bought for our remodeling and plumbing business were the Porter Cable 12V “Magnequench” drills – the first cordless tools that I thought might be serious performers.
Black and Decker did make a very early corded electric drill – but Fein is generally credited with introducing the first portable AC powered drill into the market in 1895
Nathan
Guess it’s one of those hotly contested histories then. I found this link but also notes that you posted. I wonder if maybe part of the spin is marketing. BD didn’t market their cordless product outside of industrial areas for years due to the cost and function.
https://www.ecmag.com/section/your-business/100-years-innovation-history-electric-drill
And this coincides closer with stories I’ve heard from others at Boeing and the like about how BD has close ties to them and NASA.
Nathan
I think I commented asking about this in another thread. Might be another website but either way.
In the aero world engineered fasteners are pretty much everything on a new aircraft. (777, 787, A330, Gulfstream G6, etc). There are some very critical components related to specialty fasteners. Many of them actually used as repair products due to access or other needs to help get the aircraft back in the air.
And no I don’t mean fancy rivets – though those exist too. CAM was a main line suppler to Boeing and others. SO they are a fairly high dollar business. Put another way major airlines, other maintenance vendors, and the like buy quite a bit of CAM sourced products. And this is a place where a 500 dollar bolt is in some cases a good deal.
CAM also makes stuff for automotive some of which is similar to it’s aircraft counterpart. High temp bolts that hold turbo’s together for example. Anyway point is – SBD now has another company that a solid reputation for making specialty fasteners. Does that mean we will see the CAM brand name in Lowes or HD one day – I don’t know. I’d like to but I suspect it will be Dewalt branded or maybe ?
Ken
They will be buying the rest of MTD products in July of 2021….that should be close to 1billion
Diamond Dave
Quickest way to make billions is to join the military industrial complex!
https://www.popularmechanics.com/military/weapons/news/a25678/the-cost-of-new-fighters-keeps-going-up-up-up/
Brent
You asked for a translation. Here it is:
“Industry Leading Manufacturer Of Specialty Fasteners & Components”
They’re buying a company that makes both fasteners and tools to put airplanes together. The stuff is designed just for aerospace, which makes all the tools highly proprietary and every single fastener really expensive. Why sell 3-cent screws made in China when you can sell $80 bolts that are so expensive because of all the testing involved.
“For The Aerospace & Defense End Market (~$375M LTM Revenue)”
Sales were $375 million in the last twelve months (LTM).
“Increases Scale In High Growth, High Margin Aerospace & Defense Segment And Creates A Pathway For Profitable Growth”
High-margin means a higher percentage of sales turn into profit. They already have some aerospace fastener/tools businesses but they’re not big enough to affect the stock price significantly. By buying these guys, the amount of sales and profit coming from aerospace will be big enough to improve the overall profitability of SBD.
“Purchase Price Up To $1.5B | $0.2B Contingent On The Certification & Production Levels Of 737 MAX”
They are paying about $1.3 billion guaranteed and then a “contingent” piece, which could be up to $0.2 billion ($200 million) depending on when the Boeing 737 MAX production gets restarted. Sounds like B737 is a significant part of those sales. SBD didn’t want to take the risk of paying for the B737 business only to discover that the project was canceled permanently. A contingent payment on events you can’t control makes sense for both people.
“Adjusted For ~$185M Of Expected Cash Tax Benefits, The Net Transaction Value Is ~$1.1 – $1.3 Billion”
They have some tax credits that they haven’t actually used, but which can help the buyer when the companies are combined. They paid $1.3 billion guaranteed + $0.2 billion contingent – $0.2 billion in tax benefits, so the actual amount they paid was less than the $1.3-$1.5 range. When you have this much in extra benefits, you want to point that out so nobody thinks you overpaid for the deal.
“Year 3 EPS Accretion ~$0.30 – $0.40 | Year 5 CFROI ~12%”
This means that in the third year after the deal closes, it will add $0.30 to $0.40 in earnings per share to the profits of SBD. SBD is probably going to earn something like $6.00 per share in 2020. So this means the deal will boost profits by about 5%, and that means the stock should bump by a similar amount immediately. Managements provide this guidance so that stock analysts can accurately model the effects of the acquisition.
5-year CFROI = 5 year cash flow ROI. It’s a measure of how much cash the deal should throw off. In 5 years, it’ll do 12% of the $1.5 billion, or $180 million. That’s also useful for modeling cash flow, something else analysts need to do.
Brian M
It could also be a foot in the door for selling Industrial tools (Proto/MAC) to already contracted companies…and new aerospace companies.
Charles
Stuart, is that collection of brand names at the beginning of this post all the brands owned by Stanley Black and Decker? I had no idea that all those names were now part of the same company.
Stuart
Yes!
They also bought Waterloo, but consider Waterloo a manufacturing facility and not a tool brand, and so it’s not included. They also own other assets, such as ZAG Industries in Israel.
Perhaps you’ll find more surprises here: https://toolguyd.com/tool-brands-corporate-affiliations/
SBD’s current list is here: https://www.stanleyblackanddecker.com/our-businesses/our-brands
Ira Schwartz
Let’s see how this is gonna work… they bought an American company, in America, with American money and in the end they will move it to China, for cheap ass China labor!!!!!! Just as they have done with all of the power tools they own,
DeWalt, Craftsman and many others.
480 great hard working Americans in Greenfield Indiana lost their jobs because of the money hungry dirt bags that run that place. Thank you Stanley Black and Decker for telling us right before Thanksgiving November 23, 2019, That you would be laying all of us off on January 23 2020!!!!!!!!!
I do not work for you anymore, so you can’t tell me what I can and cannot say!!!! Your petty severance package has paid out already.
Best plant all of the Americas and when that POS VP Chin took over he knew it. He wanted our plant closed because we made better, tougher DeWalt tools for Americans!!!! 100 times better than his junk producing plant in Suzhou China!!!! Coronavirus spreading shithole!!!!!! Sad that Americans will keep buying your cheap Chinese junk, because it’s cheap!!!!!!!! Wake up AMERICA KEEP OUR JOBS IN THIS COUNTRY!!!!! BUY AMERICAN MADE!!!!!
Gary A Martin
You are exactly right. I am a pattern, mold and model maker for prototypes and castings in the Portland Oregon area. Stanley Black & Decker pulled all their locally Made in USA patterns from the foundries here and either discarded them or sent them to China. Thousands of them gone. I laid off a couple of guys making good money here in the USA for some cheap labor in China. They cheapen a good product and sell it for the same amount of money they did before. Very sad as I am a third generation formally very proud owner of Stanley Tools.
JoeM
…Am I the only one that sees a connection between Aerospace/Military Grade Fasteners and the Milwaukee MX Fuel line of Industrial Cordless Tools? Tools like Power Loaders, and the CanadaARM don’t exactly fasten together with paperclips, and the F-35 or M1 Abrahms don’t hold together with glue and happy thoughts.
If the tool industry itself is going to start reaching into the INDUSTRIAL sector… Some people want to be first at making the tools, others may want their cut of the Consumables market that goes with it.
Plus, it sounds like the “Synergy” may come in supplying the manufacturing of SBD brands with larger scale fasteners of their own. So… it may reduce costs in scaling up SBD’s own reach into making MX Fuel grade tools in the Black/Yellow/Etc. variety.
Tojen1981
I’d say there’s an ex-government crony “consultant” with security clearance, that knows something big is about to go down, in one company or the other. Could have something to do with the Coronavirus scare. No proof obviously but if one had the time to dig a little deeper and connect the dots….
Remember, pay attention to this hand, not that one.
Jim Felt
Hmmm.
From the perspective of time, meaning today, I’m thinking SBD was totally prescient in placing financing before the COVID-19 crash and eminent Next Great Recession.
Amirite?
Robert Adkins
This can be great for SBD, or a trap. There’s an old saying “stick with what you know”. Often CEO’s will look at nothing but the bottom line and/or potential. Even though the model is viable, if the new business is not familiar to the CEO, it will often fail. Sometimes large failures can send ripples through the entire organization, causing a loss of cash flow and confidence even in the core brands.