Stanley Black & Decker (SWK) plans to offload its Commercial Electronics and Healthcare Security business lines for $3.2 billion. The company has struck a deal with Securitas AB (SCTBF). SWK shares rose 3.32% to close at $192.22 on December 8.
Stanley Black & Decker manufactures and distributes power and hand tools, and other related accessories. It also engages in electronic security solutions, engineered fastening systems, and healthcare solutions.
Security Asset Sale
The Board of Directors of Stanley Black & Decker and Securitas AB have already approved the transaction, which is expected to close in the first half of next year. However, its closing is dependent on securing regulatory approvals.
The company’s Healthcare Security business lines are projected to generate $1.7 billion in revenues this year. Meanwhile, adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin is projected to be in the low double digits.
The businesses are expected to continue growing within SCTBF, a leader in the security industry. (See Top Smart Score Stocks on TipRanks)
According to Chief Executive Officer, James M. Loree, the sale is consistent with the commitment to generating shareholder value. In addition, it should allow SWK to focus on its core businesses while returning capital to shareholders.
Net Proceeds from the sale are to be used to fund Stanley Black & Decker’s $4 billion share repurchase program planned for next year. The company intends to return between $2 billion and $2.5 billion to shareholders in the first quarter, and the remainder in the summer of 2022.
In addition, Stanley Black & Decker has reaffirmed that its full-year adjusted Non-GAAP EPS is estimated to be between $10.70 and $10.90.
Consensus among analysts is a Moderate Buy based on 6 Buys, 1 Hold, and 1 Sell. The average Stanley Black & Decker price target of $214.25 implies 11.46% upside potential to current levels.