Also Announces Formation of Convergent Security Solutions and Mechanical
Access Solutions Business Units Within Stanley Security Solutions
NEW BRITAIN, Conn., Dec. 14 /PRNewswire-FirstCall/ -- The Stanley Works
(NYSE: SWK) announced that it has entered into an agreement to purchase HSM
Electronic Protection Services, Inc. ("HSM") from private investors for
$545 million cash. HSM, based in Lisle, IL, provides security alarm
monitoring services and access control systems to commercial customers via
a Minneapolis, MN monitoring hub central station and a network of branch
locations across the U.S. HSM combines world class service and installation
capabilities with a broad customer base and is the fourth largest
electronic security company and second largest commercial monitoring
company in North America.
John F. Lundgren, Chairman and Chief Executive Officer, commented: "The
addition of HSM to our electronic security business is a significant step
toward enhancing our value proposition, as virtually all of our existing
security customers also purchase these services. The acquisition will
enable us to increase utilization of our extensive network of field
technicians thus enhancing overall profitability. The addition of
monitoring also enables us to forge longer term customer relationships
involving value-added services and recurring revenues, which should help to
reposition electronic security as a higher profit and higher growth
business for Stanley."
Stanley Convergent Security Solutions
In connection with the acquisition of HSM, the company announced the
formation of a new business unit, Stanley Convergent Security Solutions,
which will include its existing electronic access control and systems
integration activities as well as commercial monitoring. This new unit,
with annual revenues of approximately $600 million, including HSM, will
operate under the leadership of Brett Bontrager, currently Vice President -
Corporate Business Development for Stanley. Mr. Bontrager will report
directly into the Corporate Executive Office (CEO & CFO) and will oversee
HSM and the existing Stanley electronic security businesses, including
their combination and integration.
A strong and experienced management team headed by Tim Whall, President
and COO of HSM, will join Stanley and work together with Mr. Bontrager and
existing electronic security management in North America and elsewhere to
execute a profitable growth strategy. Mr. Whall is a security industry
veteran with more than 25 years of management experience. He joined HSM in
2004 after serving as Executive Vice President of Field Operations with
ADT, the security monitoring industry market leader. Previously he held
various positions at SecurityLink over a 10-year period, most recently
serving as its President.
The reorganization and renaming of the Security businesses enhances
Stanley's leadership position in electronic security for commercial
customers during a period of rapid industry change including, most notably,
the convergence of physical security and information based security and the
migration to internet protocol (IP) security networks. With the acquisition
of HSM and the organization changes announced today, Stanley is uniquely
positioned to serve its customers in this fast growing, evolving market.
Stanley Mechanical Access Solutions
The company also announced the formation of a new Stanley Mechanical
Access Solutions business unit, comprising its existing commercial lock
business, automatic doors and all hardware-related business activities.
This unit, with annual revenues of approximately $800 million, will be led
by Justin Boswell, currently President, Stanley Security Solutions.
Mr. Lundgren added, "Under Justin's leadership, Stanley has grown its
Security activities from $100 million in 2001 to almost $900 million in
revenues with higher than line average profitability. In reflecting upon
this period of rapid growth, it is clear that we have created two unique
businesses with distinct operating characteristics, core competencies and
strategic imperatives. The formation of two business units with dedicated
leadership, while maintaining cross-selling initiatives, will enable us to
realize the full potential of both businesses going forward." Mechanical
Access Control represents an area of significant strategic importance to
Stanley. It is among our highest margin businesses and has good growth
potential, both organically and through global expansion."
The organization changes referenced herein will become effective
January 1, 2007. The company plans to reevaluate its segment reporting in
connection with its scheduled 2006 10-K filing and ascertain whether any
changes would be appropriate at that time.
Additional Information
Stanley will purchase 100% of the shares of HSM. Both companies' Boards
of Directors have approved the transaction, which remains subject to
regulatory approvals and other customary conditions. Commercial security
monitoring companies are typically valued on a multiple of recurring
monthly revenues ("RMR"). The purchase price for HSM is approximately 60x
RMR, 2.7x annual total revenues and 12x EBITDA. The transaction is expected
to close early in 2007. Based upon the current number of shares
outstanding, this transaction is expected to be neutral to 2007 earnings,
increasing to $0.20 to $0.25 per fully-diluted share accretion by the third
year (2009) and $0.35 to $0.45 by the fifth year (2011).
Stanley remains committed to its current credit ratings and intends to
fund this transaction with a combination of available cash, debt and
equity- linked convertible debt, which it believes will be consistent with
maintaining those ratings. The company does not anticipate the need to
issue common equity in the short term in order to achieve this objective.
A conference call with investors has been scheduled for 1:00 pm Eastern
time today to discuss the information in this release. The call is
accessible by telephone at (800) 267-8424 (domestic) and (706) 634-0695
(international) and via the Internet at http://www.stanleyworks.com/ by
selecting "Investor Relations". A slide presentation to accompany the call
will be available at http://www.stanleyworks.com/ and will remain available
for one week after the call.
A replay of the call will also be available two hours after the
completion of the conference call and will remain available for one week
and can be accessed at (800) 642-1687 (domestic) or (706) 645-9291
(international) by entering the conference identification number 4540742.
Additional Information about HSM
A leader in commercial monitoring with a nationally recognized brand
and execution capabilities, HSM is well positioned to benefit from strength
in the commercial monitoring marketplace and its ability to serve large,
national accounts. HSM's excellent customer satisfaction levels have
engendered outstanding customer loyalty and low attrition rates.
Recurring monthly revenues from commercial monitoring activities
represent an important element of HSM's approximately $200 million of
annual revenues, with additional revenues generated from security system
and equipment installation and repair services. A one-time installation fee
(including cost of equipment) is billed at commencement of contracts.
Additionally, monthly monitoring fees are charged over the life of
contracts, for which a typical length is five years, and service fees are
generated from repairs that are not covered by warranty. Additional
information on HSM can be found at http://www.hsmsecurity.com.
Additional Information About The Stanley Works
The Stanley Works, an S&P 500 company with estimated 2006 revenues of
$4 billion, is a worldwide supplier of consumer products, industrial tools
and security solutions for professional, commercial, industrial and
consumer use. For over 163 years, the Stanley(R) brand has been synonymous
with quality, reliable products. Its well-known tool and storage brands
include Stanley(R) as well as FatMax(R), Husky(R), Facom(R), Bostitch(R),
Jensen(R), Mac(R), National(R), Proto(R), La Bounty(R), Vidmar(R), CST(R),
David White(R) and ZAG(R). Security Solutions brands include Stanley(R),
Best(R), Blick(R) and Frisco Bay(R). The company employs approximately
20,000 associates. More information about The Stanley Works can be found at
http://www.stanleyworks.com/.
The Stanley Works corporate press releases are available in the
Investor Relations section of the company's Internet web site at
http://www.stanleyworks.com.
CAUTIONARY STATEMENT
Under the Private Securities Litigation Reform Act of 1995
Statements in this press release, including but not limited to those
regarding the Company's ability to (i) close the acquisition of HSM early
in 2007; (ii) deliver results with respect to the acquired business such
that the acquisition is neutral to 2007 earnings, generates 20 to 25 cents
per fully diluted share accretion by 2009, and generates 35 to 45 cents per
fully diluted share accretion by 2011; and (iii) to fund the transaction in
a manner that will maintain the company's current credit ratings are
"forward looking statements" and subject to risk and uncertainty.
The Company's ability to deliver the results as described above (the
"Results") 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 press release, 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
under Item 1A Risk Factors of the Company's Annual Report on Form 10-K and
any material changes thereto set forth in any subsequent Quarterly Reports
on Form 10-Q, those contained in the Company's other filings with the
Securities and Exchange Commission, and those set forth below.
The Company's ability to deliver the Results is dependent upon: (i) the
receipt of required regulatory approvals and satisfaction of other
conditions to closing within anticipated time frames; (ii) the Company's
ability to successfully integrate the HSM acquisition while limiting
associated costs; (iii) the success of the Company's effort to build a
growth platform and market leadership in Security Solutions; (iv) the
Company's success at identifying and developing new markets for Security
Solutions; (v) the success of the Company's efforts to manage costs; (vi)
the Company's ability to generate free cash flow and maintain a strong debt
to capital ratio; (vii) the Company's ability to identify and effectively
execute productivity improvements and cost reductions while minimizing any
associated restructuring charges; (viii) the Company's ability to obtain
favorable settlement of routine tax audits; (ix) the ability of the Company
to generate earnings sufficient to realize future income tax benefits
during periods when temporary differences become deductible; (x) the
continued ability of the Company to access credit markets under
satisfactory terms; (xi) the Company's ability to negotiate satisfactory
payment terms under which the Company buys and sells goods, services,
materials and products.: (xii) the ability of the Company's employees to
adapt to changes made within the organization and to meet or exceed
expectations; (xiii) the ability to continue successfully managing and
defending claims and litigation; (xiv) the absence or mitigation of
increased pricing pressures from customers and competitors and the ability
to defend market share in the face of price competition; (xv) the Company's
ability to continue improvements in working capital, including inventory
reductions and payment terms.
The Company's ability to achieve the results will also be affected by
external factors. These external factors include pricing pressure and other
changes within competitive markets, increasing competition, changes in
trade, monetary, tax and fiscal policies and laws, inflation, currency
exchange fluctuations, the impact of dollar/foreign currency exchange and
interest rates on the competitiveness of products and the Company's debt
program, the strength of the U.S. economy and the impact of events that
cause or may cause disruption in the Company's manufacturing, distribution
and sales networks such as war, terrorist activities, political unrest and
recessionary or expansive trends in the economies of the world in which the
Company operates.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or circumstances that may
arise after the date hereof.
SOURCE The Stanley Works
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Related links:
http://www.StanleyWorks.com
http://www.hsmsecurity.com
http://www.prnewswire.com/comp/874363.html /
CONTACT:
Gerry Gould - VP, Investor Relations,
+1-860-827-3833, ggould@stanleyworks.com
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