Black & Decker Buying Pentair Power Tools Group

ATLANTA – Toolmaker Black & Decker Corp. (BDK) on Monday said it will buy Pentair Inc.'s (PNR) power tools group for about $775 million, nearly doubling the sales of its North American professional tools business.

Black & Decker also reported a 61 percent rise in second-quarter profit, and its shares jumped 14 percent to a more than 20-year high.

Black & Decker, maker of DeWalt drills, Kwikset locks and Price Pfister (search) faucets, said the Pentair business being acquired includes the Porter-Cable, Delta, DeVilbiss Air Power, Oldham Saw, and FLEX brands. It said the acquisition would add to earnings, beginning in 2005.

"It gives them a lot more critical mass within the pro power tool category and makes a lot of sense from a financial standpoint," said Longbow Research analyst David MacGregor.

He said the acquisition, which includes product lines in woodworking equipment, compressors, pressure washer and nailers, helps Black & Decker diversify beyond cordless power tools as its DeWalt brand faces competition from new players such as the Ridgid brand sold at retailer Home Depot Inc. (HD)

"There's a lot more here than just power tools," MacGregor said.

Towson, Md.-based Black & Deck said the acquisition would add 50 cents a share to 2005 earnings and another 25 cents a share in both 2006 and 2007.

MacGregor said the Porter-Cable brand would require some spending to revive but could pay off nicely for Black & Decker.

The tools group employs about 4,200 people in North America, Europe and Asia.

MacGregor, who conducts monthly surveys of tool retailers, also said Black & Decker has the financial ability to serve as a major consolidator in power tools, an overcrowded category with some underperforming brands. For instance, the Milwaukee tool brand owned by Swedish engineering group Atlas Copco is also up for sale.

"None of the players in the game right now with the exception of Black & Decker really have the critical mass to be able to play the consolidation role, at least in North America," MacGregor said. "If they're going to do that, there might be bigger opportunities ahead."

Pentair, based in Golden Valley, Minn., said the sale will allow it to focus on water filter-related products and electrical enclosures. The company had put the power-tools group on the block in February, when it announced it would buy Wicor Industries from Wisconsin Energy Corp. (WEC) for $850 million to expand its water technology business.

Pentair said it expects to close the sale later this year after regulatory approval. It will use the proceeds to pay down debt from its Wicor Industries acquisition, which is expected to close by the end of the month.

Black & Decker also reported a 61 percent rise in second-quarter profit on stronger sales across its three business segments, and raised its profit outlook for the year.

The tool maker reported second-quarter net income of $121.6 million, or $1.50 a diluted share, compared with $75.7 million, or 97 cents a share, a year earlier. Analysts on average expected profit of $1.25 a share, according to Reuters Estimates.

Black & Decker said it expects earnings from continuing operations in the range of $1.25 to $1.30 a share for the third quarter and $5.05 to $5.15 for the 2004 full year. Analysts currently expect profit of $1.28 a share for the third quarter and $4.87 for the year.

The company's shares were up 48.41 at $68.73, after earlier rising as high as $69.50. Shares of Pentair gained 70 cents, or 2 percent, to $33.50.