STANLEY BLACK

& DECKER
TEAM 9
SIDDHANT SWAPNIL SHWETANA ARNAB ABHISHEK SAKETH
HOW THE VALUE OF SYNERGIES (IF ANY) WILL BE
SHARED IN THE PROPOSED TRANSACTION BETWEEN
SHAREHOLDERS OF THE TWO COMPANIES?

Since premium is high (21.6%), synergy

captured will be more for Stanley.
MERGER DETAILS
 Exchange of stock giving Black and Decker shareholders 21.6% premium
 All of Black and Decker’s stocks will be acquired
 Stanley would pay $3.6 Bn in its stock valued at $45.23
 Stanley Shareholders would get 50.5%, Black and Decker shareholders
would get 49.5% of the combined enterprise
 Resultant cost saving was a major motivation factor – expected $350Mn
annually over 3 years
 One time restructuring cost of $400 Mn
 EPS expected to increase $1 per share versus without the merger
 CEO COMPENSATION
 John F. Lundgren, CEO of Stanley, would become the CEO of the combined
enterprise
 Grant of restricted stock units, equal in value of an option to purchase 1.1Mn shares
of Stanley common stock
 Continuation of normal compensation contract

 Nolan Archibald, CEO of Black and Decker, would become the executive
chairman
 One time grant of stock options on 1Mn shares of the combined company
 Incentive payment of
 $15Mn for achieving annual saving of $225Mn
 $30Mn for achieving annual saving of $300Mn
 $45Mn for achieving annual saving of $350Mn
 Foregone $20.5Mn severance payment
EXECUTIVE EXPENSE
 Termination or change in responsibilities would trigger payments totaling to
$92.3Mn
 Severance – 3 years pay,
 Benefits – for 3 years
 Income-tax gross ups

 Payments under the Black and Decker long term incentive plan = $13.2Mn
 Immediate vesting of unvested restricted stock, restricted stock units, and
stock options totaling $41.7Mn
 Supplemental executive retirement plan (5 senior executives) total
$22.7Mn
CORPORATE
GOVERNANCE ISSUE
• There is a growing trend in acquisitions for the buyer to offer large
monetary incentives to management of the seller to “influence” a
favorable outcome.
• Mr. Archibald, CEO of B&D had $10 million per year pay package
• Cost synergy bonus of up to $45 million for cutting costs and
eliminating jobs in the new combined company. 
• Options on 1.0 million shares
• Reports said that the foregoing of $20.5 million severance payment by
Archibald was false; he was keeping all stock and options and
converting them to Stanley Stocks and options
rtion of Synergy that may go to the CEO

John Lundgren Stanley CEO Nolan Archibald Black & Decker CEO
Stock Benefit 49.85 Forego

Severance Package 20.5

Annual Bonus 5.325
Annual Equity Award 1.85
Total Forego 27.675
Benefit
Total Synergy $350M
Stock 45.23
John Lundgren $49.85M (14.2%)
Incentive 45
Nolan Archibald $70.555 (20.16%)
Total Benefit 90.23
Total CEO $120.405 (34.4%)
Cost Benefit 70.555
As a shareholder of Stanley would you vote in
favor of this transaction? Would you vote in
favor of the compensation arrangements? Why?
 Yes

Discount Rate
NPV 0.08 0.09 0.10 0.11 0.12 0.13
178.80 170.86 163.22 155.87 148.79 141.97

Year 1 Year 2 Year 3

Synergy 125 250 350
Cost to Achieve
Synergy 330 50 20
Other Expense 70
Free Cash Flow
Saving -275 200 330
THANK
YOU