"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.