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STANLEY
WORKS COMPANY
NEW
BRITAIN
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- - - - - - - - - - - - - - - - - -
IN
THE MATTER OF THE MEETING FOR THE
EMPLOYEES
IN
RE: STANLEY WORKS and BLACK & DECKER MERGER,
-
- - - - - - - - - - - - - - - - - - -
November
4, 2009
9:00
A.M. O'CLOCK
1000
Stanley Drive
New
Britain, Connecticut
Reporter: JENNY
C. EBNER, RPR, LSR 00030.
BRANDON
SMITH REPORTING AND VIDEO
44
Capitol Avenue
Hartford,
CT. 06106
(860)
549-1850
Page
2
1
A P P E A R A N C E S:
2 NEWS
BROADCAST NETWORK
75
Broad Street
3 15th
Floor
New
York, NY 10004
4 212-684-8910
sgold@newsbroadcastnetwork.com
5 By: STEVE
GOLD, ESQ.
6
FOR THE RESPONDENT:
SARD
VERBINNEN & CO.
7 630
Third Avenue
New
York, NY 10017
8 212-687-8344
apartridge@sardverb.com
9 cbujarski@sardverb.com
By: AMY M.
PARTRIDGE, ESQ.
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1 ...
The following is the transcript of
2
the Meeting, IN RE: STANLEY WORKS and BLACK &
3
DECKER MERGER, which was held at Stanley Works,
4
1000 Stanley Drive, New Britain, Connecticut, on
5
November 4, 2009 at 9:00 o'clock a.m.
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1 P-R-O-C-E-E-D-I-N-G-S
2
3 MR.
GOLD: Good morning, ladies and
4 gentlemen.
5 I
wanted to, before the Town Hall
6 meeting
actually got underway, to
7 explain
what we are doing here today.
8 You've
seen the cameras. We are
9 videotaping
this event. And the reason
10 why
is that we are turning it into a
11 webcast
so that the entire universe of
12 Stanley
employees, worldwide, will be
13 able
to share in this Town Hall meeting.
14 And
after John Lundgren finishes his
15 remarks,
there will be an opportunity
16 for
you to ask questions. And insofar
17 as
those questions are concerned, we
18 have
four individuals around the room
19 who
have mics, just like this,
20 (indicating). It's
very, very important
21 that,
one, that you wait for those mics;
22 otherwise,
your question is not going to
23 be
heard on our tape.
24 Secondly,
it's equally important
25 that
you hold the mic as close to your
Page
5
1 mouth
as I am. You see what happens
2 when
I take it down? It doesn't work
3 quite
so well. When I hold it up here,
4 I
am loud and clear.
5 Also,
if you don't mind turning off
6 your
cell phones, because we have very
7 sensitive
mics.
8 Good. So,
without further ado your
9 Chief
Executive Officer John Lundgren.
10 (Applause)
11 CEO
LUNDGREN: I have never seen so
12 many
people in the Stanley Center. I
13 asked
Jim Vecci if we were raffling off
14 Yankees
World Series tickets today.
15 Anyway,
thanks a lot for being here.
16 Obviously,
it's a very exciting
17 opportunity
for us. And as was
18 suggested,
because of the nature of this
19 transaction,
with two large public
20 companies,
webcast, video cast,
21 recorded,
my remarks, my prepared
22 remarks
will actually be a little more
23 formal
than normal. I.
24 Will
stick to the script that we
25 developed
to be sure that all of the
Page
6
1 information
is communicated in a
2 consistent
manner.
3 But
I think most important, we will
4 also
try to be sure we leave enough time
5 for
you to ask some questions that are
6 on
your mind, many of which we aren't
7 going
to be able to answer, but
8 hopefully,
most of which we will.
9 So,
let's get through the formal
10 part
of presentation and open it for Q
11 and
A..
12 Needless
to say, I am delighted you
13 are
joining us here, and I think I can
14 tell
from the turnout that you probably
15 have
heard we have agreed to combine
16 Stanley
with Black & Decker, in an all
17 stock
transaction valued at
18 approximately
4.5 billion dollars.
19 And
you also probably recognize the
20 Black
& Decker name. It probably won't
21 come
as a surprise to you, especially
22 those
of you familiar with the business,
23 that
we determined that combining our
24 two
companies made an awful lot of
25 sense.
Page
7
1 But
in case you are not familiar
2 with
Black & Decker, it's one of the
3 best
known global manufacturers and
4 marketers
of quality power tools,
5 accessories,
hardware, home improvement
6 products
and technology-based fastening
7 systems.
8 They
have manufacturing operations
9 in
eleven countries. And some of their
10 brands
are as powerful as many of ours,
11 not
the least of which are Black &
12 Decker,
DeWalt, Porter Cable and
13 Kwikset.
14 They
are a global leader in the
15 power
tool segment, and similar to
16 Stanley,
they are an established company
17 with
roots dating back to 1910, Black &
18 Decker
is celebrating its 100th anniversary
19 next
year in 2010.
20 Together
we will be a more global
21 company;
we will be a more diversified
22 industrial
company, and we will have an
23 even
broader array of products and
24 services.
25 We
will be a leading company in hand
Page
8
1 tools,
as we are already, and we will be
2 a
leading company in power tools and
3 accessories. And
we will be even a more
4 significant
player in mechanical and
5 electronic
security solutions.
6 Without
question, we will be in a
7 far
better position to advance each
8 priority
in the strategic framework that
9 we
have been following since 2004.
10 Let
me tell you a little bit about
11 what
makes the transaction so
12 compelling,
and what our new company
13 will
look like.
14 There
were many reasons this
15 transaction
made sense for Stanley. I
16 am
just going to highlight a few.
17 First,
as I alluded to, the
18 combination
of our well-known brand
19 names
and theirs, including Dewalt,
20 Baldwin,
Porter Cable, Kwikset, along
21 with
many others, making us even
22 stronger
and more diverse, broadening
23 our
offerings to our customers, creating a
24 compelling
investment for shareholders,
25 and
increasing the opportunity for all
Page
9
1 of
you.
2 The
combined company will have
3 strong
brand equity. Just look at those
4 brands
on the screen. They are familiar
5 to
everybody all over the world. Great
6 recognition
and appeal among retailers,
7 commercial
customers, as well as
8 individual
end users.
9 To
put it another way, we will
10 become
the supplier of choice for tools
11 all
over the world.
12 Along
the same lines, because the
13 businesses
are so complimentary to ours,
14 it
means there is no significant
15 overlap.
16 At
first blush people say Stanley,
17 Black
& Decker, how can they go
18 together? They
are in power tools. We
19 are
in hand tools.
20 When
you add up the great lineup of
21 brands,
you think, together, we will
22 have
a broader geographic sales front;
23 we
will have additional presence in high
24 growth
and emerging markets; we both
25 have
global low cost sourcing and
Page
10
1 manufacturing
platforms, and we will
2 gain
the best of each of those
3 operations.
4 We
have a shared commitment to
5 operational
excellence, a proven
6 business
management strategy in the
7 Stanley
Fulfillment System, and now we
8 can
leverage that and spread that across
9 a
company twice the size.
10 We
have a world class innovation
11 process,
and a talented work force,
12 featuring
the best people in the
13 industry.
14 I
think you can see this opportunity
15 for
this organization to become a
16 powerful
growth engine, both as markets
17 around
the world recover in the short
18 term,
but even more importantly, over
19 the
long term.
20 Moreover,
with Black & Decker's
21 position
in power tools, security hardware,
22 engineered
fasteners, and Stanley's
23 product
and service offering hand tools,
24 mechanical
and electronic security, we
25 have
a terrific opportunity to enhance
Page
11
1 both
companies strengths and provide
2 extra
resources to invest in future
3 growth
opportunities. And we are here
4 to
grow.
5 Lastly,
there is the fact that our
6 combined
financial strength will allow
7 continued
expansion of our security,
8 health
care and infrastructure
9 businesses,
as well as a new growth
10 platform
in Black & Decker's engineered
11 fastening
business, which has always
12 been
a core growth platform identified
13 for
Black & Decker.
14 So,
for all these reasons, I hope
15 it's
beginning to become more clear why
16 we
feel so good about the transaction.
17 If
you can't see, this slide is
18 simply
an example, and hopefully, as I
19 said
on the introductory conference
20 call,
a picture is worth a thousand
21 words. A
lot of pictures, many of the
22 products
you will see, and many you
23 know,
and some you are familiar with.
24 But
you can see the array of Stanley
25 hand
tools on the left and Black &
Page
12
1 Decker's
power tools on the right.
2 It
will become pictorially more
3 clear
there is essentially no overlap in
4 our
respective product lines.
5 Let
me turn briefly to the
6 transaction
highlights. This will keep
7 the
finance folks and the wanna-be
8 investment
bankers in the room interested.
9 I
will get through it quickly for those
10 for
those of you who aren't each.
11 Black
& Decker shareholder will
12 receive
1.275 shares of Stanley for
13 each
share of Black & Decker that they
14 own. That
is an implied 22.1 percent
15 premium
to the Black & Decker closing
16 price
as of last Friday, October 30,
17 2009. And
that actually held pretty
18 close
to that through Monday, the day of
19 the
announcement.
20 Accordingly,
the ownership of the
21 new
company will be 50.5 percent former
22 Stanley
shareholders and 49.5 percent
23 former
Black & Decker shareholders.
24 We
are expecting earnings increase
25 of
approximately a dollar per share by
Page
13
1 year
three. Much of that is going to be
2 driven
by 350 million dollars in cost
3 synergies
on an annual basis that we
4 expect
we'll fully realize within the
5 first
three years.
6 Corbin
Walburger's team could
7 explain
business development, how these
8 numbers
-- they are big numbers -- for
9 folks
who don't have a financial
10 background.
11 But
if a company like Stanley or
12 Black
& Decker trades at seven or eight
13 times
EBITDA, okay, take 350 million
14 dollars,
multiple it by seven, that's
15 two
to two and a half billion dollars.
16 That's
the value we created with this
17 transaction. It's
that simple, assuming
18 we
achieve synergies. And we have a heck
19 of
a track record of achieving those
20 synergies.
21 Stanley's
nine directors will carry
22 forward. That
means myself, [and our]
23 independent
directors will all remain on
24 the
board of directors of the combined
25 company,
and six of Black & Decker's
Page
14
1 eleven
directors will join the combined
2 board,
including Nolan Archibald, Black
3 &
Decker's president, chairman and chief
4 executive
officer.
5 And
Nolan will serve as executive
6 chairman;
I will serve as the chief
7 executive
officer of the new company.
8 So
our board will consist of Nolan and
9 myself
as what SEC would classify as
10 employee
directors and 13 independent
11 directors.
12 Joining
me on the management team,
13 meet
the new bosses, same as the old
14 bosses,
if you have heard that song.
15 Jim
Loree will become executive vice
16 president
and chief operating officer of
17 the
combined company. And Don Allan,
18 our
CF0 will be senior vice president
19 and
chief financial officer of the new
20 company.
21 The
company name will be Stanley
22 Black
& Decker. We will keep our
23 headquarters
here in New Britain, but
24 there
will be a major presence in the
25 center
of the universe for power tools
Page
15
1 in
Towson, Maryland.
2 As
I mentioned before, maintaining a
3 presence
in Towson is very important.
4 It's
an iconic brand; it's a great
5 company;
they are celebrating their
6 hundred
year anniversary, and you can
7 think
how we would feel if this
8 transaction
was moving in the other
9 direction.
10 It's
very important that we maintain
11 a
strong press in Towson, and we will.
12 We
expect the transaction to close
13 in
the first half of 2010, and given the
14 minimum
overlap, we are committed to
15 getting
this transaction closed.
16 As
I said, it's currently valued at
17 4.5
billion dollars on an enterprise
18 value. My
M and A 101 comment, there
19 was
a little bit of confusion. I
20 thought
it was a 3.5 billion dollar deal
21 versus
a 4.5 billion dollar deal.
22 That's
market cap equity versus
23 enterprise
value.
24 Simply
said, market cap or market
25 capitalization
is a company's stock
Page
16
1 price
times the number of shares
2 outstanding. Take
Stanley 45 times 80
3 million
or Black & Decker's 60 times
4 Stanley
stock price, times 1.275, that
5 is
three and a half billion.
6 The
enterprise value to that, you
7 add
long-term debt; you subtract cash.
8 so
if you've seen two numbers, they are
9 both
right.
10 One
is market cap or equity value,
11 and
one is enterprise value.
12 For
those of you who know more about that
13 than
I do, I apologize. For those of
14 you
who don't, I hope that helps clarify
15 how
big a deal this is.
16 I
don't know where you all come
17 from,
but 3.5 billion or 4.5 billion are
18 big
numbers to me.
19 It
really is remarkable how this
20 company
fits with our strategic
21 objectives. Let
me start by summarizing
22 the
strategic framework which has been
23 in
place for five years.
24 If
anyone in this room goes back to
25 the
Stanley Investor Presentations from
Page
17
1 2004
or 2005, what you see in black you
2 will
see in that presentation. We have
3 stayed
the course.
4 It
starts with maintaining portfolio
5 transition
momentum, and to be a
6 consolidator
in the tool industry, while
7 increasing
the relative weighting and
8 emerging
markets. Well, this
9 transaction
accomplishes all of that.
10 Very
importantly, we have to be
11 selective
and operate markets where the
12 brand
is meaningful, where our value
13 proposition
is definable, and
14 sustainable
through innovation. And we
15 where
we can achieve global cost
16 leadership.
17 We
believe when these attributes are
18 present
we can achieve above average
19 returns. That
is why we are here.
20 I
can't think of a company other
21 than
Stanley which values these
22 attributes
more highly than Black &
23 Decker.
24 Significant
brand equity. What a
25 phenomenal
story for our marketing teams
Page
18
1 and
our business development folks.
2 Extensive
array of high value-added
3 products
and a strong culture of
4 innovation
at both companies. I know we
5 pride
ourselves on our cultural
6 innovation,
and if you are in some of
7 the
areas where you compete for
8 attention
with the same customers as
9 Black
& Decker, I think you will
10 understand
they have got a terrific
11 process
as well.
12 We
use the discovery team; they use
13 end
users specialists. But importantly,
14 we
are selling different products into
15 the
same markets, which is what makes
16 the
future so nice.
17 Both
companies are cost leaders. We
18 will
cement and secure our cost
19 leadership
for years to come with this
20 transaction.
21 And
probably more important, I want
22 to
turn to growth. We have been so busy
23 cutting
costs, buttoning down the
24 hatches
to get through the recession, it
25 is
easy to lose sight of why we are
Page
19
1 really
here, to pursue growth on
2 multiple
fronts, through building on our
3 existing
growth platforms, as well as
4 developing
new growth platforms over
5 time.
6 Clearly,
the size and scale of this
7 acquisition,
the new engineered
8 fastening
growth platform and Emhart
9 Teknologies,
a proprietary stud welding
10 and
riveting system business that in
11 normal
cases are mid-teen's operating
12 margins
has great growth prospects, and
13 we
are very much looking forward to
14 bringing
those businesses into the
15 Stanley
portfolio.
16 And
last, but without question, not
17 least,
we can accelerate the progress
18 with
the Stanley Fulfillment System.
19 You
are going to see, in a minute,
20 there's
a terrific opportunity to apply
21 the
SFS principles to the Black & Decker
22 activities
and generate more cash and
23 even
more operational efficiency from
24 what
is already a great company.
25 I
would like to address the Stanley
Page
20
1 Fulfillment
System, and hopefully, if
2 you
haven't realized it, take a minute
3 to
say it's been very successful for us
4 over
the last three years. It's really
5 come
to maturity, and it's really
6 generated
some great benefits.
7 But
the numbers speak louder than
8 the
words. You can see on this chart
9 it's
pretty simple. On the right-hand
10 side,
Stanley has taken its working
11 capital
turns from 4.3 back in 2006 to
12 6.1
at the end of 2008.
13 We
fully expect to be in the mid
14 sixes,
maybe even pushing seven, with
15 help
from the top line, by the end of
16 this
year.
17 Black
& Decker has made some
18 improvements
as well. Particularly in
19 the
third quarter of 2009. It doesn't
20 show
on this chart.
21 But
we believe that the application
22 of
the Stanley Fulfillment System to the
23 Black
& Decker activities, we believe
24 with
that we can free up an additional
25 500
million dollars in cash over the
Page
21
1 next
three years, and we fully expect to
2 capture
that.
3 The
second, I think you probably can
4 think
ahead, there are a lot of good
5 things
to do with that cash.
6 There
is really nothing dramatically
7 different
about the businesses. The
8 product
lines are different, but we are
9 serving
similar end markets and similar
10 customers
that would prevent us from
11 doing
that.
12 Let's
look at our financial
13 objectives. Again,
they haven't changed
14 since
2004. Stanley had financial
15 objectives
in place depicted on the
16 chart,
and during 2003 and through 2008
17 we
achieved the overwhelming majority of
18 these
particular objectives. And I
19 think,
as a company, we prospered.
20 In
late 2008 and 2009 the macro
21 economic
environment had a significant
22 impact,
negative impact on all of us.
23 That
includes Stanley and includes
24 Black
& Decker. But going forward, as
25 the
economy is stabilized, we begin to
Page
22
1 grow
again and we feel that these
2 objectives
will achievable of the
3 combination
of two companies, actually
4 puts
us in a really nice place to
5 continue
to go forward over the next
6 five
to 10 years and hit these different
7 objectives
in a different time frame.
8 Now
I would like to really address
9 one
of the myths about this transaction.
10 Some
people, particularly external
11 people
who do not understand Stanley as
12 well
as the folks in this room, are people
13 that
don't understand Black & Decker as
14 well
as their 20,000 very capable
15 associates
around the world. They seem
16 to
think this is a bit of a regression
17 related
to our diversification strategy.
18 And
I suppose mathematically it is.
19 If
you look at the chart -- it's a busy
20 chart,
but I will walk you through it.
21 If
you took purely a static look,
22 you
might come to the conclusion that
23 it
is a slight step backwards, for lack
24 of
better terminology, toward more
25 concentration
in CDIY.
Page
23
1 First
of all, we have a great CDIY
2 business,
and so do they. And having it
3 be
a major part of company, which it's
4 been
for Stanley for many years isn't a
5 problem.
6 Perhaps
if you just look at the
7 numbers,
it's nowhere near as big a step
8 as
people might have thought at first
9 blush.
10 Let
me walk through the numbers.
11 The
pie represents under Stanley and
12 Black
& Decker the way we communicate
13 our
segmentation of our company
14 externally.
15 And
if we start with Stanley, you
16 can
see 42 percent of our revenues come
17 from
security, 34 percent from
18 construction
and DIY, and 24 percent
19 from
the industrial segment.
20 Black
& Decker has a different way
21 of
characterizing their segments.
22 Generally
they are not so different than
23 Stanley
four or five years ago where
24 they
report externally by product line
25 or
we might say SBU, or a collaboration
Page
24
1 of
SBUs, as opposed to buy-in markets.
2 When
you break it down, they are 73
3 percent
in tools and
4 accessories,
16 percent in hardware and
5 home
improvement, and 11 percent in
6 fastening
and assembly systems.
7 What
we have done, with their help,
8 is
attempted to recharacterize what the
9 segmentation
might look like on a
10 prospective
basis, if we simply use
11 Stanley's
categories of CDIY, industrial
12 and
security.
13 So
those redish-orange arrows you
14 seen
on the right actually show the
15 revenue
from Black & Decker that would
16 go
into each of the Stanley segments.
17 So
you can see 2.9 billion goes in
18 construction
and DIY. That comes both
19 from
power tools and accessories, as
20 well
as some from hardware and home
21 improvement.
22 And
the other point I wanted to make
23 on
this chart in terms of customer
24 concentration,
at one point back in
25 2002,
those are the small numbers on the
Page
25
1 bottom,
Stanley had 22 percent of its
2 business
with one customer, and 40
3 percent
of our total business was in
4 U.S.
home centers and mass merchants.
5 We've
talked a lot about, over the
6 years,
about how we deliberately tried to
7 reduce
our customer concentration. They
8 are
great customers, but this is
9 good
business sense for Stanley.
10 And
by 2008 we are down to six
11 percent
with our larger customers and 13
12 percent
in U.S. home centers and mass
13 merchants.
14 On
a pro forma business this
15 transaction
takes us to about 12 percent
16 with
our larger customers, so it doubles
17 from
where we were, but it's still
18 half
-- doubles from where we are today,
19 but
is still half, only half of the
20 concentration
where we were in 2004, and
21 about
24 percent with U.S. home centers
22 and
mass merchants.
23 It's
a number we feel comfortable
24 with. And
it really takes us back,
25 essentially,
a year or two in terms of
Page
26
1 our
concentration level. And we will
2 have
the opportunity to continue to move
3 and
continue to execute our strategy
4 going
forward, successfully, as we have
5 in
the past.
6 Again,
those numbers focus on a 8.5
7 billion
dollar combined entity, which is
8 three-quarters
of actuals and our
9 outlooks
for the fourth quarter.
10 But
remember both Black & Decker and
11 Stanley
are significantly down in
12 volume,
as are so many companies, and
13 revenue.
14 Black
& Decker is down about 23
15 percent
year to date. Stanley is down
16 about
19.
17 2008
actuals added together, this is
18 a
10.5 billion dollar company. That is
19 how
big we can be in the very near
20 future,
excluding any benefit of
21 acquisition
or any growth, other than
22 organic
growth and help from the market.
23 That's
really the key. It's just an
24 outstanding
opportunity to combine two
25 companies
and generate cash flow.
Page
27
1 From
a portfolio perspective, while
2 a
stall step toward concentration in
3 CDYI,
it's absolutely one we can address
4 quickly,
as I suggested, as our business
5 development
team goes to work and we grow
6 all
three of our businesses.
7 The
next slide is, maybe, my
8 favorite
one, because it talks about
9 growth
and our existing three growth
10 platforms: Convergent
Security, which
11 is
the electronic security and services
12 business
with an emphasis on commercial
13 monitoring
and its capabilities; our
14 mechanical
security business, which when
15 the
companies combine will actually have
16 full
continuum of products right from
17 the
high end electro-mechanical locking
18 system
all the way down to residential
19 lock
sets, and then of course,
20 industrial
and automotive tools.
21 With
Facom, Mac, Proto we are
22 the
number two franchise in the
23 industry,
able to go head to head with
24 Snap
On.
25 It's
really exciting to think of the
Page
28
1 potential
from merging with Black &
2 Decker's
power tool technologies and
3 products
and developing them into these
4 markets
so we continue to grow that
5 business.
6 Then
we have some new growth
7 platforms. The
exciting addition for
8 Black
& Decker is engineered fastening
9 which
is also based in Connecticut.
10 It's
in Shelton and New Haven. It's the
11 former
Emhart Teknologies business.
12 It's
a proprietary stud welding and
13 riveting
systems business. In normal
14 times
they are in the mid-teens
15 operating
margins, and has great growth
16 prospects.
17 We
are very much looking forward to
18 adding
that to our business.
19 And
of course, you have heard Jim
20 and
me talk a little bit about health
21 care
and infrastructure. Two emerging
22 platforms
we hope to grow to a billion
23 plus
over the strategic planning period,
24 and
we will have the extra cash flow to
25 do
just that.
Page
29
1 So
we are bringing together two
2 great
companies known for tools. But in
3 closing,
I think it's really important
4 to
emphasize our strategic direction
5 remains
unchanged. We are a hundred
6 percent
committed to the security solutions
7 business
and our other high growth
8 platforms. And
we are more than excited
9 about
the new growth platform,
10 engineered
fastening that I just
11 discussed
that comes with the
12 combination
with Black & Decker.
13 With
the strong cash flow generated
14 by
this merger we have increased
15 resources
to invest in brand building
16 and
all these growth platforms.
17 We
achieved record gross margins in
18 the
second and third quarters of 2009,
19 despite
low volume. And we believe the
20 combined
company will have further
21 opportunities
for margin improvement
22 across
all business segments, again
23 allowing
us to maintain our long-term
24 capital
allocation objectives.
25 Once
we are satisfied that we have
Page
30
1 maintained
an investment grade, upper
2 tier
credit rating, we will continue
3 with
our strategy; our dividend strategy
4 remains
unchanged, as we put in our
5 press
release, and our cash allocation
6 strategy
and capital allocation
7 strategy,
going forward the intent is
8 two-thirds
toward creative acquisitions
9 returning
one-third to the shareholders
10 in
equal parts, dividends and stock
11 buy-backs.
12 We
will have a complementary and
13 comprehensive
array of iconic brands
14 with
global product offerings that are
15 also
complimentary.
16 The
transaction enhances the core
17 strength
of each company, creates a
18 stronger
global company with a shared
19 commitment
to operational excellence.
20 And
I think it's clear there is some
21 substantial
synergy opportunities with
22 this
transaction that many many people
23 on
both sides have thoroughly vetted,
24 and
we strongly believe are achievable.
25 Now,
just based on the size of
Page
31
1 turnout,
there is probably a question or
2 two
about what this means for you.
3 I
thought it was really important
4 for
me to come talk to you today. Even
5 I
don't know all the answers yet. It's
6 also
nice to talk to a friendly audience
7 as
opposed to media and investors who
8 have
a lot of questions.
9 But
I will say, we couldn't have had
10 a
much better day or a much better
11 reception
to this announcement in the
12 investment
community and media, I think,
13 than
we received it.
14 My
preference would have been to be
15 here
first, but it comes with the
16 territory. Customers
first and media
17 second
and employees third. And you
18 can't
do it all at once, so I apologize
19 this
meeting didn't take place
20 yesterday.
21 This
is the best I could do. I
22 think
it's important to note, we are a
23 global
company. Jim Loree would love to
24 be
here; Don Allen would love to
25 be
here; Mark Mathieu and many of the
Page
32
1 senior
executive are here.
2 Jim
left on a plane last night and
3 landed
in Brussels this morning. I think
4 you
are aware Brussels is six hours
5 ahead
of New Britain.
6 Jim
is having the same meeting with
7 a
large employee population in Europe at
8 the
same time at 3:00 o'clock in the
9 afternoon
in Brussels and 9:00 here.
10 And
Don Allen is picking up the
11 baton
for two or three of the investor
12 meetings.
13 I
was scheduled to present in New
14 York
today and tomorrow. So we are
15 dividing
and conquering. You get me;
16 the
investors get Don; the Europeans get
17 Jim. And
you got the short straw, but
18 my
house is in Farmington, and I am the
19 CEO.
20 I
can tell you that we actually
21 expect
this combination to be a smooth
22 process. I
can also tell you, as I
23 already
have, that the headquarters are
24 going
to be here.
25 Power
tools will stay to Towson, and
Page
33
1 we
will put the right people in the
2 right
places to get the job done.
3 I
can tell you there will be synergies
4 realized
from the combination. We
5 outlined
them in the press release; we
6 outlined
them in the webcast, and we
7 will
achieve them.
8 We
expect the vast majority of our
9 employees
to benefit from the increased
10 opportunities
that are available as
11 being
part of a much larger company.
12 And
while any combination like this,
13 there
will be employment adjustments
14 globally. That
impact will be less than
15 10
percent of the combined work force.
16 At
this point, and I cannot
17 emphasize
this enough, the best and most
18 important
thing for all of us to do is
19 remain
focused on our work, and remain
20 focused
on our customers.
21 The
senior management team,
22 obviously,
had this news a little bit
23 before
you did. Just a good example,
24 Jeff
Ansel spoke to 50 customers in the
25 last
24 hours; I spoke to three or four
Page
34
1 of
our largest customers, and so forth.
2 Stay
focused on your customers, and
3 stay
focused on our commitments.
4 As
more important information
5 becomes
available and more decisions are
6 made,
you have my commitment, and Mark
7 Mattieu's
and Tim Perra's, who does a
8 great
job communicating to the large
9 Stanley
employee population around the
10 world,
we will keep you as informed as
11 we
possibly can.
12 It's
critically important to keep in
13 mind
that this announcement is simply
14 the
first step in a long process of
15 planning,
integrating, and implementing.
16 Integration
planning is already well
17 underway. An
integration steering
18 committee
has been identified to oversee
19 bringing
these two companies together.
20 Nolan
Archibald and I will cochair
21 this
committee. And we have already
22 assigned
some of Stanley's best, most
23 capable,
and most experienced executives
24 to
participate in the process.
25 In
the months ahead, our
Page
35
1 shareholders
and many regulators have to
2 approve
the transaction before it can
3 close
and before the true integration
4 process
can begin. This approval
5 process
is likely to take several
6 months. And
at this point our
7 expectation
is the transaction will
8 close
sometime in the first half of
9 2010.
10 We
can not control the speed at
11 which
that moves. Until that time, as
12 difficult
it is for you, for me, for all
13 of
us, it's business as usual.
14 And
I do ask that you do everything
15 you
can to ensure that we don't miss a
16 beat
in delivering on our commitments to
17 our
customers, to our shareholders and
18 each
other.
19 As
we work through this process,
20 keep
in mind the goal of this
21 transaction
is to significantly grow our
22 business
over the long term, which, of
23 course,
will ultimately result in
24 increased
opportunities for both Stanley
25 and
Black & Decker employees.
Page
36
1 The
communications team and Kate
2 White,
Corbin Walburger, the investment
3 relations
team with some help from Sard
4 Verbinnen
and some real pros around the
5 world,
have done a really good job
6 getting
as much of this information
7 in
one place and possible.
8 So,
I strongly encourage you to
9 regularly
visit the intranet, which will
10 serve
as useful source of information
11 regarding
this transaction as we update.
12 Also
posted on the intranet you will
13 find
press releases and frequently asked
14 questions,
and a lot of materials that
15 will
answer many of your questions, and
16 it
will serve as a foundation for
17 discussion
with colleagues and
18 employees.
19 We
are simply thrilled about this
20 combination
and the opportunity that it
21 puts
in front of all of us.
22 Good
timing on the part of Stanley.
23 Your
work got us here.
24 Let's
open it up for questions and
25 answers.
Page
37
1 Who
is going to ask the first
2 question?
3 MR.
GOLD: Please stand up for the
4 question
and wait for the mic and hold
5 it
close.
6
7 (Pause.)
8
9 CEO
LUNDGREN: We are all a New
10 Britain
audience, but Terry, if you
11 would
just identify yourself for folks
12 who
don't know you, Terry Christianson,
13 plant
manager, New Britain.
14 I
have done that for you, but --
15 only
because Terry is a celebrity, at
16 least
in his own mind.
17 MR.
CHRISTIANSON: I am Terry
18 Christianson. I
am the plant manager of
19 New
Britain, plant for tools. My
20 question
is, hopefully, in layman terms,
21 John.
22 On
Monday when both stocks were
23 about
$45 share, Stanley chose and
24 through
some process of determining that
25 it
would be a one and a quarter kick for
Page
38
1 the
Black & Decker people, could you
2 explain
in layman terms how that comes
3 about,
how that premium was established
4 as
you guys were evaluating the merger?
5 And
secondly, who took advantage or
6 could
take advantage of that between
7 4:00
o'clock on Monday night and
8 Tuesday.
9 I
mean, does -- how does that work
10 that
off trading hours, that, you know,
11 that
progresses as fast as it did?
12 CEO
LUNDGREN: Good question. I
13 will
do the best I can. I resist the
14 temptation
to say Jim Loree and I took a
15 dart. It
was very important --
16 Let
me back up and -- thanks for
17 very
much for the question, because you,
18 among
others, bleed yellow and black;
19 you
know this has been a vision.
20 Let
me go back and say, because I
21 have
been here -- I will be here six
22 years
at the end of the year, and we are
23 just
delighted to get this transaction
24 done.
25 I
am the fourth Stanley CEO to
Page
39
1 have
had a conversation with Black &
2 Decker
about putting these two companies
3 together,
and Don Davis, you know, an
4 icon
in Stanley history, really put this
5 company
on the map. And I was flattered
6 that
was one of the first calls I got
7 when
the announcement came out.
8 Don
actually spoke with Black &
9 Decker
somewhere between 25 and 30 years
10 ago. These
companies belong together;
11 couldn't
figure who would run the
12 company. Quote,
pure mergers of equals
13 usually
don't work with coCEOs and
14 somebody
needs to be in charge. It's
15 quite
that simple.
16 Dick
Ayers spoke with Nolan
17 Archibald,
the current CEO of Black &
18 Decker. And
if I didn't say this, Mr.
19 Archibald
has run Black & Decker for 24
20 years,
a phenomenal leader of a great
21 company. Didn't
work out.
22 John
Trani met Nolan Archibald
23 to
talk about putting these two
24 companies
together. They couldn't agree
25 who
would run it. They couldn't agree
Page
40
1 what
the best way go forward was. They
2 didn't
think the pain was worth the
3 activity. Nothing
happened.
4 It's
well recorded, and it needs to
5 be
because it's a -- it's a public
6 transaction. I
approached
7 Mr.
Archibald. That is public record.
8 He
said, What you would like to talk
9 about?"
10 I
said, "We would like to talk about
11 merging
the companies." So there is
12 lots
of way to merge companies.
13 When
we looked at this synergy
14 opportunity,
we understood, and as I
15 gave
us the math in layman's terms, 350
16 plus
million times seven, creating two
17 and
a half billion dollars of market
18 cap,
at the time that was greater than
19 the
market cap of either company.
20 We
said, "We may not like each
21 other." But
we do. We get along fine.
22 We
didn't think of ourselves as
23 competitors. We
were people who knew
24 one
another. We said we need to find a
25 way
to get this done.
Page
41
1 Of
course, Nolan said, "I am going
2 to
run the company. I have done it for
3 24
years." And I thought I might. So
4 rather
than -- rather than put it on ice
5 for
another seven years, I give Nolan a
6 tremendous
amount of credit, because
7 that
was both of our -- there is so much
8 value
here we need to unlock it.
9 As
he said in an interview, and it's
10 true,
he said, "I could beat John in an
11 arm
wrestling contest, but he is eight
12 or
nine years younger than I am, and
13 it's
obvious he should run the combined
14 company.".
15 Nolan
is 66. He is in perfect
16 health. And
I think he will be doing
17 something.
Certainly he is going to be
18 involved
in our organization for at
19 least
three years. He is a great leader
20 who
really wasn't looking to retire.
21 But
he ceded that Stanley had a
22 wonderful
track record. He respected
23 Stanley
management and understood
24 somebody
needed be in charge. Now let's
25 make
it as close to merger equal as
Page
42
1 possible.
2 The
simple answer, Terry, is when
3 you
cede control, you get a premium for
4 that. That
is -- so therein we
5 established
the fixed, a fixed exchange
6 ratio,
which was negotiated, how big is
7 that
premium.
8 If
a Black & Decker shareholder and
9 saying
I am not getting any more than I
10 am
getting in the marketplace today, why
11 should
we sell our company? We should
12 put
it up for auction.
13 If
you're Stanley, you know, if we
14 are
going to control the company, we
15 have
to expect to pay a premium.
16 A
lead-on to that, though, is why an
17 all
stock, because in layman's terms,
18 more
cash, less equity, higher equity
19 returns. An
all stock deal -- because
20 Black
& Decker wasn't for sale, but by
21 an
all stock deal with as close to 50/50
22 as
we could get it, both sets of
23 shareholders
benefit equally from the
24 capitalized
value of that 350 million in
25 synergies
times seven or eight. So both
Page
43
1 shareholders
will benefit.
2 That
is why it was an all stock
3 deal,
and that is why we think that both
4 shareholders
will understand.
5 Based
on the market's reaction, we
6 were
delighted both sets of shareholders
7 got
it.
8 It's
unheard of, one in 20, maybe
9 we
would need an investment banker, or I
10 don't
Corbin -- I am sure Corbin is
11 here,
is he is not? Corbin Walburger,
12 who
many of you know is vice president
13 corporate
development, spent 12 years at
14 Goldman
Sachs, one in 20, Corbin, all
15 stock
deal? One in 20, at the most, all
16 stock
deal is announced and both stocks
17 go
up.
18 Usually
the acquirer's stock goes
19 down,
and someone thinks there will be
20 some
intervention.
21 But
no other company, financial
22 buyers,
no one else -- you need these
23 two
companies together to realize these
24 synergies
and that big lift.
25 Simple
answer is we were afraid you
Page
44
1 might
get in trouble if you would try
2 to
do day trading or night trading, so
3 we
didn't tell you.
4 You
always announce these after the
5 market
closes. The best reason being so
6 you
can communicate with your investors,
7 some
of whom are shocked, and some of
8 whom
aren't, so you can talk to them
9 about
what it is, explain the rationale,
10 after
it's public information but before
11 the
market opens.
12 The
reason is, someone might say,
13 our
larger shareholder, Barrow Hanley,
14 what
have they done, sell five
15 million
shares of Stanley into the
16 opening? We
didn't want them to do
17 that,
obviously.
18 So,
we knew between announcement and
19 after
market closes and the market opens
20 we
could talk to our largest investor
21 and
say, do you understand this; do you
22 understand
the logic; what are your
23 questions?
24 That
is why almost always it is done
25 after
a market closes, to give you a
Page
45
1 chance
to communicate before the market
2 opens.
3 The
simple example -- the best way
4 to
say it is, no one can take advantage
5 of
it. And that is by design.
6 You
also have arbitrage people and
7 everything
else.
8 For
those of you who didn't notice,
9 the
beauty of it was their stock went up
10 31
percent; ours went up 10. How many
11 math
majors here? What is the different
12 between
31 and 10? Twenty-one. Gee,
13 about
the premium.
14 So
it's important that those stocks
15 trade,
you know, in that range,
16 because,
assuming the deal closes, and
17 we
think it will, we are confident it
18 will,
you know you are going to get
19 essentially,
not necessarily 21 or 22
20 percent,
but whatever Stanley is selling
21 for,
if you are a Black & Decker
22 shareholder,
you are going to get 1.275
23 times
that in Stanley stock the day it
24 closes.
25 The
beauty of it is a lot of people
Page
46
1 said,
I want Stanley stock; I will take
2 some
now, if you will, which is a very
3 very
nice reaction.
4 I
hope that helps and covers both of
5 your
questions. I covered a few other
6 things,
because I think they are
7 important
to communicate. But our
8 financial
advisors, in providing a
9 fairness
opinion, which they are
10 required
to do in a transaction like
11 this,
because ultimately our board of
12 directors
who unanimously approved in
13 transaction,
they need to feel that, you
14 know,
that proper advice, proper due
15 diligence,
proper accounting was done,
16 in
providing their fairness opinion
17 they,
obviously, opined this was a fair
18 deal
for the Stanley shareholders.
19 They
would say the synergy numbers
20 for
a transaction of this size were un
21 precedented.
22 If
you think about why, we have
23 talked
about it. No overlap in the
24 businesses
but common customers, common
25 markets,
common end markets, so we
Page
47
1 simply
said, We think, we think that is
2 why
the deal was so well received on, if
3 you
will, both sides of Wall Street.
4 Okay. Long
answer to a simple
5 question.
6 SPEAKER
1: Thank you, John. The
7 other
thing I would just add is that it
8 is
interesting that a deal this large,
9 the
information did not get out to the
10 Stanley
employees. There were no leaks
11 as
far as we were concerned. Amazing.
12 CEO
LUNDGREN: That's what happens.
13 You
are over there productively making
14 tools,
Terry. That is what we are
15 paying
you for. I figured if we needed
16 your
opinion we would have asked for it.
17 One
of the reasons it does happen --
18 Terry
has given me, I guess, permission
19 to
publicly tease, him and he knows if I
20 didn't
truly respect him as a person and
21 manager
I would never do that.
22 That
is a huge risk, Terry, always,
23 because
all of a sudden what happens,
24 there
is a leak, oh, Stanley is buying
25 Black
& Decker; Black & Decker's stock
Page
48
1 runs
up. Guess what? Now we can't buy
2 Black
& Decker.
3 So
that is why -- this was a big
4 deal,
obviously. This wasn't a 40
5 million
dollar acquisition of a division
6 of
a privately-held company. These are
7 two
publicly-traded companies. There
8 were
people in the corporate staff
9 involved. They
had to be.
10 And
you know, I will take a
11 second
-- I won't acknowledge specific
12 individuals,
but Bruce Beatt's team
13 worked
very hard to make it clear what
14 you
could do and what you couldn't do,
15 if
you were aware that this transaction
16 is
going on. But as due diligence
17 starts
to be performed and you get
18 closer
to an announcement, obviously,
19 more
people had to be involved.
20 But
Don Allen's entire team, at the
21 senior
level, Mike Bartone's team, Craig
22 Douglas
and his team, Bruce Beatt's
23 entire
team. There were probably 20
24 people
at Stanley, by last month, aware
25 that
this transaction was going to take
Page
49
1 place.
2 And
I look at the back of the room,
3 you
know, just incredible professionals.
4 Tim
Perra, staff from Sard Verbinnen,
5 who
is an extraordinary, if you will, PR
6 firm
that the deals and things just like
7 this,
to ensure that all that
8 information
is ready and locked and
9 loaded.
10 But
they are real professionals, and
11 they
understand that any of that getting
12 outside
the circle before would have
13 devastating
conversations.
14 So
we were advised, as I said by
15 Goldman
Sachs and Deutsche Bank, two world
16 class
financial organizations, Cravath
17 Swain
& Moore, you know, incredibly
18 competent
and capable, and Bruce reminds
19 me,
a very expensive law firm in New
20 York
City.
21 And
two of the ladies are here from
22 the
Sard Verbinnen team, and from top to
23 bottom,
Kate White, if I didn't mention
24 Kate,
Tim Para, did a phenomenal job
25 having
all this information, knowing
Page
50
1 they
couldn't share it with anybody.
2 That
is why they are Pros.
3 Another
question?
4 MR.
GOLD: Could the next questioner
5 please
stand up.
6 MS.
SCHMIDT: Hi. Mary Schmidt,
7 Stanley
Proto CFO.
8 The
question I have, you mentioned
9 we
are going around communicating to our
10 employees
and Don and Kate are
11 communicating
with our investors. What
12 is
the plan for communicating to the
13 Black
& Decker employees, and then
14 eventually
to their investor group, and
15 will
our team be a part of the
16 communication
to their investor group?
17 CEO
LUNDGREN: Very good. Thanks
18 for
the question. Where is Bruce?
19 Press
the play button. He is not here? He is
probably
20 resting. He
lost a lot of sleep.
21 Bruce,
why don't you take the
22 microphone? We
have communicated --
23 Marybeth,
thanks so much for asking the
Page
51
1 question.
2 I
will give you the thousand foot
3 version,
and while we would love to
4 communicate
with them, in other words, I
5 would
love for Jeff Ansel's team to be
6 able
to get to their national accounts
7 team,
we simply can't do that yet.
8 Remember
my words that said, Until
9 this
closes it's business as usual. We
10 are
going to do some integration
11 planning. There
is tremendous
12 sensitivity
on the other side.
13 If,
for any reason, this deal
14 doesn't
close, we would do irreparable
15 damage.
16 So,
Bruce, could I ask you to.
17 BRUCE: Yes.
18 CEO
LUNDGREN: So, Marybeth, simply
19 said,
there won't be a lot of
20 interaction
between us and our
21 counterparts
at Black & Decker, certainly
22 until
the deal is very close to closing.
23 You
know, I have made it clear to
24 Nolan,
as has Jim and others, we are
25 available
if your people want to see me,
Page
52
1 and
you know, hopefully, conclude I am
2 not
a fire breathing dragon, because I
3 am
their new boss.
4 But
we need to walk a very fine
5 line.
6 Bruce,
let me defer to you, please.
7 BRUCE: I
think John emphasized
8 what
is most important is that we are
9 basically
going to run as independent
10 companies. We
have an anti-trust
11 review,
so we are going stay away from
12 one
another except for the integration
13 team,
which knows the does and dont's
14 about
talking and doing it properly.
15 So,
do it that way, and if there is
16 communication,
it will be processed
17 through
our integration team, headed up
18 by
Brett Bontrager.
19 CEO
LUNDGREN: Essentially, every
20 business
head, every department head,
21 every
manager, if you haven't seen it,
22 you
will, in the FAQs there is a whole
23 series
of dos and doesn't, and
24 obviously,
Marybeth, this is only an
25 announcement
plus 24 or 36 hours. It's
Page
53
1 quite
specific what you can and can't
2 do.
3 And
I will just reemphasize, stick
4 to
the script. You're not doing anybody
5 any
favors by speculating. And you
6 know,
as I say, as you saw, much more
7 than
you are used to, I -- I stick to
8 the
script as well.
9 Because
at this stage, because we
10 are
both publicly-traded companies, much
11 of
what we do in large groups must be
12 recorded,
must be filed, and the worst
13 thing
to do would be recording opinions
14 that,
quite frankly, that A, aren't
15 correct,
and B, could have an adverse
16 impact
on our ability to move forward.
17 So
we have to walk a fine line.
18 We
want to get going. This is a
19 huge
transaction, and there is some
20 regulatory
approvals that are going to
21 be
required.
22 So
he doesn't have to identify
23 himself
for those of you who don't know,
24 Mike
Proto, who is vice president of
25 Global
Sourcing.
Page
54
1 MR.
PROTO: Thank you. At the same
2 time
many of us are being contacted by
3 suppliers. We
buy a lot; they buy a
4 lot,
and I guess it's also important to
5 know
I think those same rules apply to
6 the
supply base. So Bruce or John,
7 maybe
you can expound a little bit on
8 that.
9 CEO
LUNDGREN: Same thing in terms
10 of
business as usual. That is one area,
11 and
Bruce, you clarify or correct what I
12 say
wrong, one area where they are going
13 to
be more sensitive than we are, again,
14 because
if, for any reason, this
15 transaction
didn't close, you know, they
16 need
to have an organization that is
17 locked
and loaded and can carry on.
18 There
are ways, and it's called a
19 clean
room. It's a process that is set
20 up
where Black & Decker could submit its
21 data,
what commodity you buy from
22 supplier
X, and what do you pay for it.
23 We
can do the same thing. That can
24 be
scrubbed, if you will, by an
25 independent
third party. It can be a
Page
55
1 consulting
firm, and we have retained, I
2 will
say, the A team, from Bain and
3 Company,
a company that is
4 extraordinarily
well established with a
5 lot
of real smart people, with a great
6 knowledge
of our original organization,
7 many
of you with have worked with them,
8 to
help us through that process.
9 All
they know is it's commodity A
10 and
supplier A. And they can look at
11 that
and say, yes, there is a big
12 difference,
so its probably a synergy
13 there.
14 And
but names and numbers and
15 collaboration
can not happen until the
16 deal
closes.
17 There
is a process whereby day one
18 we
can get going on it, as opposed to
19 trying
to do it ahead of time.
20 So,
for those of you in the
21 procurement
area, or I am thinking some
22 of
the CDIY/SBU leaders, who I know work
23 with
procurement but also work with
24 suppliers
of components and end product,
25 it's
the same thing.
Page
56
1 Gene,
that is very interesting.
2 Talk
to me. That is good information to
3 know. Talk
to me when the deal closes.
4 Anybody
else.
5 JODIE:
Jodie ck, working with Mike
6 Proto
on GSM.
7 John
and Jeff, you mentioned that
8 you
spoke to a lot of our key customers,
9 three,
and Jeff about 50. What were the
10 reactions,
and was there any
11 unanticipated
concerns?
12 CEO
LUNDGREN: Yes. I will take it.
13 Jeff,
if you want to add to it. First
14 of
all, we have, I will say a history, a
15 good
history and a rule that, quite
16 frankly,
it's one that Jeff Ansel taught
17 me
on arriving to Stanley, we don't
18 speak
on behalf of our customers; we
19 don't
ever show the investment community
20 a
new product before our customers have
21 seen
it; and if our customers want their
22 comments,
you know, shared broadly, they
23 will
make them publicly.
24 So
I want to be, you know, very
25 careful,
because, you know, the SEC and
Page
57
1 investment
community want to know all
2 that,
too.
3 Jeff
gave me this. These are just
4 sound
bites from his 50 conversations.
5 Okay? I
asked it be printed out this
6 morning. I
had the good fortune, and
7 won't
even name names, but between Nolan
8 Archibald
and myself, assume it to say
9 we
spoke to the top of, essentially
10 every
customer, both common customers
11 and
not.
12 The
reaction was extraordinarily
13 positive,
and where we thought, you
14 know,there
might some issues, negatives,
15 a
lot say, you got to get this closed,
16 good
luck, two wonderful companies
17 combining;
let's get this closed and
18 work
with you on how we can sell more of
19 both
of your products.
20 So
that was the general. I didn't
21 think
we were expecting armageddon.
22 What
I will say, and what I am
23 comfortable
saying -- I know Jeff is
24 here. I
am looking around like he's
25 sitting
there.
Page
58
1 Sorry,
Jeff. I am not used to you
2 with
a coat on, you know.
3 Jeff,
because Jeff probably has --
4 Jeff
and his organization probably has
5 more
customers to face than anyone else
6 in
the room, so Jeff was somebody I
7 said,
I don't know what your plans were
8 on
Monday night but, it ain't going to
9 be
watching the World Series and
10 football
game.
11 We
didn't expect any especially knee
12 jerk
reaction day one. But our
13 customers
will be contacted by the
14 regulatory
authority. You know, and it
15 would
have been good for us to know if
16 there
were any really adverse reactions.
17 So
far they are not. I will go
18 so
far as to say they have been
19 surprisingly
supportive. You are two
20 great
companies. This deal makes sense,
21 and
we think it will be a better
22 company.
23 Let's
face it, put these two
24 companies
together, do we really have
25 have
more leverage against any of the
Page
59
1 big
box companies? No way.
2 Black
& Decker is an important
3 supplier;
Stanley is an important
4 supplier;
hopefully the combined
5 companies
are an even more important
6 supplier.
7 I
got a lot of let's figure out how
8 we
can work together and sell more
9 products.
10 We
are really happy with the growth
11 of
our relationship over the last year
12 or
two, and let's work together to
13 figure
out how we can sell more combined
14 products
when the deal closes.
15 That
is a so far so good. You never
16 know
what will happen down the road.
17 Do
we have time for one more?
18 Question
back here, Jim? Or two. You
19 know,
I have been doing nothing but
20 talking
the last three days, so if we
21 stop
by noon it's a short day for me.
22 MR.
HUETTER: I am Dan Huetter,
23 corporate
brand marketing. I am
24 wondering,
why does a deal like this get
25 communicated
publicly before it actually
Page
60
1 closes? Aren't
there some, I guess
2 risks,
in case for some reason it
3 doesn't
work.
4 CEO
LUNDGREN: On the contrary, Dan.
5 Risks
are -- that is what -- if you ever
6 heard
the fond term arbs or arbitrage
7 traders,
they are going to trade on the
8 fact
this deal won't close. Some will
9 make
a little money and some will lose a
10 lot
of money. It serves them right.
11 Once
the boards of directors have
12 agreed
on a material transaction of a
13 publicly
traded company, we have, and
14 Bruce
is our expert, but we have four
15 days
to announce it. And you are far
16 better
off announcing it within four
17 minutes,
because a lot of misinformation
18 will
get out.
19 So
there is never a deal involving
20 two
public companies, realistically,
21 that
can be announced at closing.
22 We
will announce some small
23 transactions. We
will -- in other
24 words,
we will announce it and close it
25 at
the same time. Particularly if they
Page
61
1 were
not publicly traded, because there
2 is
not a lot of folks out there
3 speculating
or trying to trade on inside
4 information.
5 That
is why this is so important.
6 Right
now there is no material new
7 information
provided at this meeting.
8 There
is no one that will not have
9 access
to what I am saying, how I am
10 answering
your questions. That is
11 required
by the SEC, because we are both
12 publicly-traded
companies, and there
13 will
be people taking positions and
14 opinion
based on what they think the
15 stocks
will do, whether they think this
16 deal
will close or not.
17 It's
a big game. I don't mean to
18 downplay
it.
19 But
we are legally obligated to
20 announce
this deal publicly to set
21 within
hours of when the board of
22 directors
of both companies agrees to
23 it.
24 But
we announce it with all the
25 caveats. It
needs regulatory approval;
Page
62
1 it
needs shareholder approval for both
2 companies,
because we issue -- we are
3 going
to issue 70 million new shares of
4 stock. That
is all part of process.
5 You
announce it with the caveats,
6 but
you announce it so immediately
7 everybody
is on the same page and
8 everything
has the same information.
9 It's
a legal obligation for
10 publicly-traded
companies.
11 One
more. I will take them until I
12 am
worn out or it gets to be a quarter
13 past
10:00. Then we all need to go back
14 to
work.
15 You
can read about this on the
16 intranet.
17 SABRIA: Hi
John. I am Sabria from
18 global
supply management. I was just
19 curious
to know how does this
20 transaction
impacts our presence and
21 footprint
in Europe and Asia?
22 CEO
LUNDGREN: Europe and Asia? I
23 will
add Latin America to that. Both
24 companies
have significant presence in
25 Europe,
and I would think I think Black
Page
63
1 &
Decker has done a little better job in
2 eastern
Europe or former eastern Europe
3 than
we have.
4 But
just like North America, we are
5 going
to be a bigger company in Europe.
6 Again,
though, the fit is beautiful. We
7 are
Facom and Proto and industrial
8 tools
and Jeff Ansel's terrific business
9 in
hand tools.
10 They
are power tools. They have a
11 European
business head. He happens to
12 be
based near London as opposed to near
13 Brussels.
14 So
our business is going to become
15 about
twice as big in Europe.
16 They
haven't made much more progress
17 in
Asia than we have. Business
18 situation
is quite similar. Where they
19 are
growing rapidly from a low base,
20 they
do a lot of sourcing, and they do a
21 lot
of production there. So it's just
22 gives
us more -- how do I say --
23 organizational
capacity to grow.
24 Their
headquarters happens to be in
25 Shanghai
and so is ours.
Page
64
1 Six
months from now we will probably
2 share
an office and sharing an
3 management
team.
4 They
are just scratching the surface
5 in
India, as we are. So that is
6 similar.
7 One
of the things that Jeff and I
8 and
others were quite surprised to learn
9 is
how much bigger their business is in
10 Latin
America than ours.
11 Yes,
we are the core; we have a lot
12 to
learn from them.
13 Simply
said, we are going to double
14 our
size in Asia, but it's from a small
15 base. We
are going to about double our
16 size
in Europe, but it's from a big
17 base,
and we are going to have a broader
18 array
of products to attack those
19 emerging
markets, and hopefully, grow
20 even
faster with a different skill set.
21 MR.
GOLD: Do you have any more?
22 Okay.
23 SPEAKER: John,
can you share your.
24 CEO
LUNDGREN: You need to introduce
25 yourself.
Page
65
1 SOMEONE
FROM IT: Okay. I am Buron
2 Baraji
CK from IT. This is an exciting
3 acquisition,
but I want to understand
4 your
thoughts on the cultural aspect in
5 integration. How
do you see our culture
6 fitting
with BDK?
7 CEO
LUNDGREN: So far -- Thank you
8 for
that question. The answer is we
9 don't
know. We haven't spent enough
10 time
with them yet, but if we thought
11 there
was going to be a tremendously --
12 if
we thought there was going to be a
13 lot
of difficulty, we wouldn't proceed
14 with
the transaction. We are talking
15 about
40,000 people.
16 I
think two things importantly.
17 This
was not a hostile takeover. It was
18 a
negotiated merger, where two CEOs,
19 ultimately
two executive management
20 teams
and two sets of boards of
21 directors
said there is two and a half
22 billion
dollars worth of value creation
23 out
there by putting these two companies
24 together.
25 You
have to put them together
Page
66
1 successfully
or that doesn't get
2 realized.
3 Let's
say, first, there is a pretty
4 good
incentive for everybody involved to
5 get
this done.
6 I
think to the extent there are
7 differences,
we both have long, rich
8 histories. I
think we both have a
9 history
of product innovation.
10 I
think -- I am proud of the fact I
11 believe
we have developed in the last
12 three
or four years a reputation for
13 operational
excellence, and I think that
14 is
respected and it's respected by the
15 other
side.
16 You
know, our success with
17 integrating
acquisition speaks for
18 itself. And
thus far, all we have been
19 able
to present to senior management of
20 the
other side is, this is how we would
21 go
about trying to put these two
22 companies
together; what do you think.
23 And
it was very well received.
24 Simply
said -- it was a great
25 question. Way
too early to tell, but if
Page
67
1 we
saw anything that looked like
2 irreconcilable
culture classes or
3 culture
conflicts, we would have -- it
4 would
have been prudent not to proceed
5 with
the deal.
6 Most
importantly, this was, as I
7 say,
not the hostile takeover you read
8 about
in the paper.
9 To
Dan Jester's question, those are
10 the
things at that go back and forth and
11 back
and forth, and you know, the
12 arguments
are fought in the media.
13 Obviously
they wanted more; we
14 wanted
to pay less; lots of negotiations
15 and
ultimately you shake hands and say
16 it's
a deal, and the lawyers go write it
17 up.
18 So
this was a friendly merger, its
19 the
best way to describe it. But you
20 know,
one company ultimately needs to be
21 in
control. And you know, if, among
22 other
reasons, based on the hard work of
23 20,000
people around Stanley, we were in
24 the
fortunate position to do that.
25 Black
& Decker could just as easily
Page
68
1 have
done that. The time was good for
2 us;
the time was good for them. And
3 that
is why -- they say three is a
4 charm. It
took four tries, but we were
5 able
to come to terms how to put the
6 companies
together and realize the
7 economic
benefits, how to create career
8 opportunities
for the overwhelming
9 majority
of employees, figure out how we
10 are
going to run it, and move forward.
11 Is
that, you know, most of that we
12 got
to on Monday night. The hard work
13 only
starts now.
14 Let's
call it a day unless --
15 let's
call it day. And what I can say
16 is
there will be more to come. You will
17 hear,
you know, lots of true rumors and
18 lots
of false rumors. Most of you have
19 heard
me say the only bad question is
20 the
question that you don't ask.
21 Tim
and Kate and others have really
22 set
up, I think, a great way for you to
23 get
a question asked and answered. If
24 we
can't answer and are allowed to, we
25 will
get back to you.
Page
69
1 If
we can't answer it because we are
2 at
a stage in the process where we don't
3 know
or are legally constrained from
4 doing
so, we will tell you that.
5 Let's
wrap up. Great day yesterday
6 in
the history of Stanley. And let's
7 hope
the next 160 years are better than
8 the
last 160.
9 Thank
you.
10
11 (Whereupon
the meeting was concluded
12 at
10:00 o'clock a.m.)
13
14
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18
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20
21
22
23
24
25
Page
70
1 CERTIFICATE
2 I,
JENNY C. EBNER, R.P.R., L.S.R., do
3
hereby certify that the foregoing public hearing
4
at Stanley Works for employees was taken on
5
November 4, 2009, and is true and accurate to the
6
best of my knowledge and belief.
7
8 ______________________________
Jenny
C. Ebner, R.P.R., L.S.R.,
9 Certified
Court Reporter.
CT.
License 00030
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CAUTIONARY
STATEMENTS
Under
the Private Securities Litigation Reform Act of 1995
Statements
in this document that are not historical, including but not limited to those
regarding the consummation of the proposed transaction between Stanley and Black
& Decker and the realization of synergies in connection therewith, are
“forward looking statements” and, as such, are subject to risk and
uncertainty.
Stanley’s
and Black & Decker’s ability to deliver the results as described above is
based on current expectations and involves inherent risks and uncertainties,
including factors listed below and other factors that could delay, divert, or
change any of them, and could cause actual outcomes and results to differ
materially from current expectations. In addition to the risks, uncertainties
and other factors discussed in this document, the risks, uncertainties and other
factors that could cause or contribute to actual results differing materially
from those expressed or implied in the forward looking statements include,
without limitation, those set forth in the “Risk Factors” section, the “Legal
Proceedings” section, the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” section and other sections of Stanley’s and
Black & Decker’s Annual Reports on Form 10-K and any material changes
thereto set forth in any subsequent Quarterly Reports on Form 10-Q, those
contained in Stanley’s and Black & Decker’s other filings with the
Securities and Exchange Commission, and those set forth below.
These
factors include but are not limited to the risk that regulatory and stockholder
approvals of the transaction are not obtained on the proposed terms and
schedule; the future business operations of Stanley or Black & Decker will
not be successful; the risk that the proposed transaction between Stanley and
Black & Decker will not be consummated; the risk that Stanley and Black
& Decker will not realize any or all of the anticipated benefits from the
transaction; the risk that cost synergy, customer retention and revenue
expansion goals for the transaction will not be met and that disruptions from
the transaction will harm relationships with customers, employees and suppliers;
the risk that unexpected costs will be incurred; the outcome of litigation
(including with respect to the transaction) and regulatory proceedings to which
Stanley or Black & Decker may be a party; pricing pressure and other changes
within competitive markets; the continued consolidation of customers
particularly in consumer channels; inventory management pressures on Stanley’s
and Black & Decker’s customers; the impact the tightened credit markets may
have on Stanley or Black & Decker or customers or suppliers; the extent to
which Stanley or Black & Decker has to write off accounts receivable or
assets or experiences supply chain disruptions in connection with bankruptcy
filings by customers or suppliers; increasing competition; changes in laws,
regulations and policies that affect Stanley or Black & Decker, including
but not limited to trade, monetary, tax and fiscal policies and laws; the timing
and extent of any inflation or deflation in 2009 and beyond; currency exchange
fluctuations; the impact of dollar/foreign currency exchange and interest rates
on the competitiveness of products and Stanley’s and Black & Decker’s debt
programs; the strength of the U.S. and European economies; the extent to which
world-wide markets associated with homebuilding and remodeling continue to
deteriorate; the impact of events that cause or may cause disruption in
Stanley’s or Black & Decker’s manufacturing, distribution and sales networks
such as war, terrorist activities, and political unrest; and recessionary or
expansive trends in the economies of the world in which Stanley or Black &
Decker operates, including but not limited to the extent and duration of the
current recession in the US economy.
Neither
Stanley nor Black & Decker undertake any obligation to publicly update or
revise any forward-looking statements to reflect events or circumstances that
may arise after the date hereof.
Additional
Information
The
proposed transaction involving Stanley and Black & Decker will be submitted
to the respective stockholders of Stanley and Black & Decker for their
consideration. In connection with the proposed transaction, Stanley
will file with the Securities and Exchange Commission (the “SEC”) a registration
statement on Form S-4 that will include a joint proxy statement of Stanley and
Black & Decker that will also constitute a prospectus of
Stanley. Investors and security holders are urged to read the joint
proxy statement/prospectus and any other relevant documents filed with the SEC
when they become available, because they will contain important
information. Investors and security holders may obtain a free copy of
the joint proxy statement/prospectus and other documents (when available) that
Stanley and Black & Decker file with the SEC at the SEC’s website at
www.sec.gov and Stanley’s website related to the transaction at
www.stanleyblackanddecker.com. In addition, these documents may be
obtained from Stanley or Black & Decker free of charge by directing a
request to Investor Relations, The Stanley Works, 1000 Stanley Drive, New
Britain, CT 06053, or to Investor Relations, The Black & Decker Corporation,
701 E. Joppa Road, Towson, Maryland 21286, respectively.
Certain
Information Regarding Participants
Stanley,
Black & Decker and certain of their respective directors and executive
officers may be deemed to be participants in the proposed transaction under the
rules of the SEC. Investors and security holders may obtain
information regarding the names, affiliations and interests of Stanley’s
directors and executive officers in Stanley’s Annual Report on Form 10-K
for the year ended January 3, 2009, which was filed with the SEC on
February 26, 2009, and its proxy statement for its 2009 Annual Meeting,
which was filed with the SEC on March 20, 2009. Investors and
security holders may obtain information regarding the names, affiliations and
interests of Black & Decker’s directors and executive officers in Black
& Decker’s Annual Report on Form 10-K for the year ended
December 31, 2008, which was filed with the SEC on February 17,
2009, and its proxy statement for its 2009 Annual Meeting, which was filed with
the SEC on March 16, 2009. These documents can be obtained free
of charge from the sources listed above. Additional information
regarding the interests of these individuals will also be included in the joint
proxy statement/prospectus regarding the proposed transaction when it becomes
available.
Non-Solicitation
A
registration statement relating to the securities to be issued by Stanley in the
proposed transaction will be filed with the SEC, and Stanley will not issue,
sell or accept offers to buy such securities prior to the time such registration
statement becomes effective. This document shall not constitute an
offer to sell or the solicitation of an offer to buy, nor shall there be any
sale of such securities, in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to appropriate registration or qualification
under the securities laws of such
jurisdiction.