Earlier this month Newell Brands put elements of its tool business up for sale and within a week’s time came to terms with Stanley Black & Decker, which agreed to pay $1.95 billion for Lenox, Irwin, and Hilmor. If the sale is approved by regulators SB&D—already the world’s largest tool company with 15% market share—will become even larger.
In the short term, the sale of these brands will mean little to tradesmen, because it can take years for new owners to revamp or reposition product lines. The folks at SB&D are clearly excited to be acquiring these brands though it remains to be seen what they will do with them.
While researching this piece I viewed a PowerPoint presentation and listened to a conference call between SB&D and representatives of the banking and investment community. Most of what they had to say was flat out boring financial stuff, but I did pick up some interesting tidbits about the tool business.
According to SB&D, the purchase will significantly increase the size of the company’s high margin hand and power tools accessories businesses while extending its reach deeper into the plumbing and electrical trades. Watch out Klein and Milwaukee?
By acquiring Lenox SB&D instantly becomes a leading producer of band saw and linear blades. Lenox is the world’s number one producer of band saw blades and number two producer of linear blades—a category that includes recip saw and jigsaw blades. It’s unclear whether the combined production of Lenox and SB&D would be enough to unseat Bosch as the number one producer of linear blades.
One of the more interesting things in the call was a slide with a list of potential brand and product expansions, including:
Lenox Power Tools
DeWalt & Stanley Accessories
Lenox and Irwin Storage
It’s unlikely the folks at Newell Brands ever considered making power tools but I can see why SB&D might choose to introduce them under the Lenox brand. After all, SB&D produces power tools under the DeWalt, Porter-Cable, B&D, and Bostitch brand labels. If they go that route I hope the tools they develop are worthy of the Lenox name, and not versions of existing tools with different labels on them. As for storage products, except for some soft bags with the Irwin logo on them (and a plastic tool case sold overseas), neither Irwin nor Lenox offers much in the way of storage. If SB&D decides to introduce tool boxes and organizers under those labels, I hope they’re compatible with existing DeWalt systems such as ToughSystem and TStak. Modular storage is one of the few areas where I think it’s fine to rebadge existing products, because it allows tradesmen to mix and match boxes without committing to a single brand.
The term “synergy” came up again and again in the phone conference, mostly in reference to the tens of millions of dollars that will be saved by “leveraging SB&D’s global distribution channel structure”. By that they mean consolidating distribution—lowering head count and closing redundant facilities. You might not think that would factor into a purchase decision, but when the Stanley Works merged with Black & Decker to become SB&D, the combined company is said to have saved hundreds of millions in distribution costs. Distribution is one of SB&D’s strengths and is a big part of why this deal is happening.
According to SB&D, part of what made it the ideal buyer for Lenox and Irwin was its experience selling and distributing hand tools and accessories—which is different than distributing power tools. The analogy in our world would be the contractor who is good at producing a whole bunch of small jobs versus the contractor who is good at producing a small number of big jobs. Both might do the same amount of business but each requires a different kind of expertise.
According to the Freedonia Group, a market research company that covers the tool industry, "In value terms, Stanley Black & Decker's estimated annual power tool sales outweigh its hand tool sales, but the acquisition of Newell Brands' tools division will boost the company's hand tool sales. Stanley Black & Decker was the third largest supplier of hand tools to the US market in 2015, and this acquisition has the potential to make Stanley Black & Decker the single largest supplier of hand tools to the US market.”
It will be interesting going forward to see what happens with the Lenox and Irwin brands—and how SB&D’s competitors react to it.