Stanley buying Craftsman tool brand

HOFFMAN ESTATES, Ill. (Jan. 5, 2017) — Sears Holdings Corp. is selling its Craftsman tool and equipment brand to Stanley Black & Decker for a net value of about $900 million.

The Craftsman transaction provides Stanley Black & Decker with the rights to develop, manufacture and sell Craftsman-branded products in non-Sears Holdings retail, industrial and online sales channels across the U.S. and in other countries.

Stanley will pay Sears $525 million at closing, $250 million at end of year three and annual payments on new Stanley Craftsman sales through year 15. The present net value of all these cash payments is approximately $900 million, the companies said.

Sears will continue to offer Craftsman-branded products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley, which will be royalty-free for the first 15 years after closing and 3 percent royalty-bearing thereafter, the companies said.

Today, only about 10 percent of Craftsman-branded products are sold outside of Sears' operations, the company said.

"We are pleased to reach this agreement, after determining that externalizing the Craftsman brand would accomplish our goals of driving value for Sears Holdings and positioning Craftsman for future growth," said Sears Holdings Chairman and CEO Edward S. Lampert.

Stanley Black & Decker President and CEO James M. Loree called the Craftsman brand a "legendary, American brand with tremendous consumer awareness." He noted that Stanley will be able to build on the Craftsman brand legacy of providing quality products at value pricing.

"This agreement represents a significant opportunity to grow the market by increasing the availability of Craftsman products to consumers in previously underpenetrated channels," Mr. Loree said. "We intend to invest in the brand and rapidly increase sales through these new channels, including retail, industrial, mobile and online."

To accommodate the future growth of Craftsman, Stanley Black & Decker intends to expand its manufacturing footprint in the U.S., where the firm has increased its manufacturing headcount 40 percent in the past three years.

Stanley said sales of Craftsman products outside the Sears Holdings and Sears Hometown distribution channels were approximately $200 million over the last 12 months; the company expects the sale of Craftsman-branded products to contribute approximately $100 million of average annual revenue growth for the next 10 years.

Mr. Lampert said the transaction "represents a significant step in our ongoing transformation to a membership focused business model. Craftsman has a storied history as an iconic American brand and in Stanley Black& Decker we have found a great owner that is committed to expanding Craftsman and helping it to reach its potential outside of its current channels.

"It's important for our members to know that we will continue to sell Craftsman in-store and online at Kmart and Sears, and Sears Hometown, and the structure of the transaction will provide Sears Holdings with a significant upfront payment, another payment in three years and an opportunity to participate in the growth of the Craftsman brand in both our stores and at other retailers selected and managed by Stanley Black & Decker."

In December, Sears reported a net loss of $748 million for the third quarter as sales dropped about 14 percent to $5 billion, compared with the year-ago quarter.