Stanley Black & Decker announced yesterday that it will acquire the remaining 80 per cent ownership stake in MTD Holdings Inc. (MTD), a privately held global manufacturer of outdoor power equipment, including Cub Cadet® and Troy-Bilt®, for $1.6 billion in cash. Stanley Black & Decker acquired a 20 percent stake in MTD in 2019.
With over $2.5 billion of revenue in the last twelve months, MTD designs, manufactures and distributes lawn tractors, zero turn mowers, walk behind mowers, snow blowers, residential robotic mowers, handheld outdoor power equipment and garden tools for both residential and professional consumers under well-known brands like Cub Cadet® and Troy-Bilt®.
Stanley Black & Decker’s Chief Executive Officer, James Loree said the company had worked with MTD over the last three years and have been impressed with the quality of the management team, their talented employees and MTD’s relentless dedication to innovation in the outdoor space.
“The combination of businesses will create a global leader in the $25 billion and growing outdoor category, with strong brands and growth opportunities that align with two market trends driving our business – the consumer reconnection with the home and garden and electrification. We have clearly identified multiple levers to drive growth and margin expansion and are looking forward to welcoming MTD’s 7,500 employees to our Stanley Black & Decker family,” Mr Loree said.
MTD’s Chairman, Chief Executive Officer and President Robert Moll said his grandfather founded MTD nearly 90 years ago, and he is as proud of its history as he was excited about the future with Stanley Black & Decker.
“Both companies are proven leaders in our respective industries with iconic brands, world class capabilities and a passion for bringing new and innovative products to our consumers. I know we are partnering with an organization that will continue to deliver on our purpose of inspiring people to care for and enjoy the outdoors,” Mr Moll said.
Donald Allan Jr., Stanley Black & Decker President and CFO, also said that the acquisition of MTD creates a multi-year roadmap for organic revenue, profitability and cashflow growth.
“We expect to generate significant revenue synergies as we capitalize on the two companies’ collective technology investments, strong brands and global customer relationships. We have significant balance sheet flexibility supported by strong free cash flow generation to fund the MTD acquisition and to consider other capital deployment opportunities. We are excited to begin the next phase of our journey with MTD to realize these benefits, deliver high-teens return on capital, and build an innovative outdoor products leader,” Mr Allan said.
Together Stanley Black & Decker and MTD plan to introduce new and innovative products for professional and residential outdoor equipment customers. MTD has recently made significant progress in improving its EBITDA margin from 4.5 per cent in 2018 to high single digits over the last twelve months and there is runway for further EBITDA margin improvement to the mid-teens over the next four years as cost and revenue opportunities are realised.
The company expects the transaction to result in cumulative annual cost synergies of approximately $100 million by 2025, with planning assumption for 2022 carrying revenue of approximately $2.6 billion and consolidated adjusted EBITDA over $230 million.
Using these assumptions, the acquisition is expected to be approximately $0.50 accretive to adjusted earnings per share in 2022, increasing to over $1.00 by 2025. One-time charges associated with the acquisition are expected to be $175 – $200 million of integration, restructuring and other deal related costs and approximately $125 – $150 million of non-cash charges such as inventory step-up, which in the aggregate will largely be incurred upon closing and during the first three years of ownership. The total purchase price represents an adjusted LTM EBITDA multiple of approximately 8x.
The acquisition, which is subject to regulatory approvals and customary closing conditions, is expected to close in 2021 and will be funded with a combination of cash on hand and proceeds from debt incurrence, which we expect to include support by new credit facilities.
Stanley Black & Decker, an S&P 500 company, is a leading $14.5 billion global diversified industrial with 56,000 employees in more than 60 countries. The company operates the world’s largest tools and storage business; the world’s second largest commercial electronic security company; and is a global industrial leader of highly engineered solutions within its engineered fastening and infrastructure businesses.
MTD Holdings Inc is known for its award-winning lawn mowers, snow blowers, trimmers, and outdoor power equipment for both residential and commercial markets. The company was founded in 1932 and is headquartered in Valley City, Ohio. The MTD family of brands includes Cub Cadet®, Troy-Bilt®, Robomow®, Rover®, and WOLF-Garten® – all backed by a strong network of MTD support focused on quality, service and value.