A couple of interesting acquisitions in the past 24 hours; late yesterday a bid for Black & Decker (BDK) by Stanley Tools - apparently finalizing a 28 year courtship!

  • Stanley agreed to buy Black & Decker for about $3.5 billion in an all-stock transaction, creating a global tool maker worth about $8.4 billion.  The combined business, to be called Stanley Black & Decker, will own many names familiar to do-it-yourselfers, including the companies’ namesake lines, Stanley’s FatMax and Bostitch and Black & Decker’s DeWalt and Porter-Cable offerings. The two companies have little overlap in their products, with Stanley best known for hand tools and construction equipment and Black & Decker for power tools.

Unlike most deals nowadays which seem to be done for no other reason that the CEO can say I added value! to try to justify his/her pay, this one makes a lot of sense due to similar customer demographic, yet little overlap. However, per the usual merger metrics, some job losses are certain to follow to offset redundancy.

  • Executives said most of the savings will come from reducing corporate overhead and consolidating business units and manufacturing, distribution and purchasing. Black & Decker has 22,100 workers and Stanley has 18,200 employees.
  • The deal also represents a coming wave of consolidation in the industrial sector as companies try to cut additional costs as revenue remains flat. Both Stanley and Black & Decker have been hurt by the real estate crash, which has slowed new construction and spending on new equipment.

More interesting was Warren Buffet's outright acquisition of Burlington Northern (BNI) - Berkshire Hathaway already owned a good piece of the firm, but he wants the whole thing.  (both boards appear to have already approved the deal)  Makes a lot of senses since these railroads are mini oligarchs of their own; of course Warren wraps himself in the US flag in his public reasoning for the purchase... it has nothing to do with almost no competition and massive pricing power.  Also fascinating is the decision to split the B shares of Berkshire 50 to 1; I guess fewer Americans could afford that $3250 price tag.

  • Warren Buffett's Berkshire Hathaway Inc (NYSE:BRK-A - News; NYSE:BRK-B - News) said it agreed to buy railroad Burlington Northern Santa Fe Corp (NYSE:BNI - News) in Buffett's biggest acquisition ever.
  • In a statement, Buffett said railroads are key for the United States' future growth, and will only grow when the nation grows.  ...(I)t's an all-in wager on the economic future of the United States, Buffett said. I love these bets.
  • Berkshire Hathaway Inc. already owns a stake of about 22 percent in Burlington Northern, and says it will pay $100 a share for the rest of the company. That is a 32 percent premium over Burlington's closing price on Monday.