Newell Investors Cheer Stanley Black & Decker's $1.95 Billion Purchase Of Tools Unit

Shares of Newell Brands Inc NWL surged nearly 20 percent after the company disclosed a definitive agreement with Stanley Black & Decker, Inc. SWK to divest its tools unit for about $1.95 billion. The companies expect the transaction to be completed in the first half of next year subject to regulatory approvals.

Newell Brands indicated that the sale proceeds would be utilized to pay down its debt in line with the objective of achieving a 3–3.5 times EBITDA leverage ratio before the year 2018 ends. On an annualized basis, the company expects normalized EPS dilution of about $0.15 if the transaction were to be closed before the current calendar year ends. This is after giving effect to the gains of short term cost actions and lower interest expenses in respect of accelerated debt repayment.

As part of a new corporate strategy disclosed last week, the company has been striking a number of strategic changes. In the last twelve months, the company divested businesses worth about $750 million.

CEO Michael Polk commented, "The actions we are taking will strengthen the underlying performance of the company and help unlock the unique opportunity for transformative value creation connected to the combination of Newell Rubbermaid and Jarden Corporation. While our Tools brands have been very good contributors to our results, we believe they will benefit from being part of Stanley Black & Decker, a global leader in the tools category."

Newell Brands indicated that it would also resort to divestiture of some other businesses. This included two winter sports units, Völkl and K2, within the Outdoor Solutions Segment.

Newell Brands traded up by $9.81, or 19.49 percent, to $60.15 in the pre-market on Wednesday.