Stanley Black & Decker Inc (SWK.N), in its second big acquisition in three months, agreed to buy Sears Holdings Corp's (SHLD.O) Craftsman brand, giving the company known mainly for power tools an entry into the lawn and garden equipment market.
The $900 million deal adds Craftsman lawnmowers, snowblowers and barbecue grills to Stanley Black & Decker's line of power and hand tools - a market where Craftsman is also strong.
The move into the lawn and garden market - estimated by Stanley B&D to be worth $12 billion - follows the acquisitive company's agreement in October to buy Newell Brands Inc's (NWL.N) tool business for $1.95 billion.
Stanley B&D has spent about $3.4 billion on more than 30 acquisitions since it was created through the $4 billion all-stock merger of Stanley Works and Black & Decker Corp in 2010, according to Robert Rulla of Fitch Ratings.
"The acquisition of this well-recognized brand has the potential to provide (Stanley B&D) with significant organic growth opportunities," Rulla wrote in a note.
Stanley B&D, whose shares were up 1.3 percent at $117.93 at midday, said it expected Craftsman-branded products to generate about $100 million of average annual revenue for the next 10 years. Shares of troubled Sears were up 1.1 percent at $10.89.
Sears, which gets a much-needed infusion of cash from the deal, will continue to offer products carrying the 90-year old Craftsman brand at its namesake and Kmart stores through a perpetual license from Stanley B&D.
With only about 10 percent of Craftsman-branded products sold outside of Sears' retail channels, the deal will give Stanley B&D the right to expand the brand in non-Sears channels.
The company said the deal would add 10-15 cents per share to its earnings per share in the first year after closing, about 35-45 cents by year five and 70-80 cents by year 10.
Stanley B&D will pay Sears $525 million in cash at closing, expected later in 2017, $250 million at end of year three and annual payments on the Craftsman sales through year 15. The net present value of all cash payments is about $900 million.
Stanley Black & Decker's shares rose 7.5 percent in 2016, while Sears' fell 55 percent in 2016.
(Reporting by Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta and Ted Kerr)