Stanley Black & Decker buys Boeing supplier CAM for $1.5 billion, with caveat

(Reuters) - U.S. toolmaker Stanley Black & Decker Inc SWK.N said on Wednesday it is acquiring Boeing Co BA.N supplier Consolidated Aerospace Manufacturing LLC (CAM) for as much as $1.5 billion, with a portion of the price contingent on Boeing's troubled 737 MAX aircraft returning to the skies.

FILE PHOTO: The logo and ticker are displayed for StanleyBlack & Decker on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 6, 2018. REUTERS/Brendan McDermid/File Photo

The terms of the deal illustrate how consolidation among Boeing’s vendors is being reshaped by its woes. Boeing grounded the 737 MAX in March following two crashes that killed 346 people and has halted production as it updates the plane’s flight control system and software.

About $200 million of the purchase price are contingent on the 737 MAX receiving U.S. Federal Aviation Administration authorization to return to service and Boeing achieving certain production levels, Stanley Black & Decker said in a statement.

When adjusted for approximately $185 million of expected cash tax benefits, the net transaction value is between $1.1 billion and $1.3 billion, the company noted.

CAM, currently owned by investment firm Tinicum, makes fasteners and other components for the aerospace industry.

The acquisition will help Stanley Black & Decker diversify its business beyond tools and storage, which account for about two-thirds of its revenue.

The New Britain, Connecticut-based company has spent more than $10 billion on acquisitions in the last two decades, including the tools business of Newell Brands Inc NWL.O for $1.84 billion and the Craftsman brand of Sears Holdings Corp for $937 million.

However, balking up on tools has increased the company’s exposure to big-box retailers such as Home Depot Inc HD.N and Lowe’s Companies Inc LOW.N, which limits its bargaining power. The CAM deal would help it boost its engineered fastening and infrastructure business.

“Growing and diversifying our industrial business through M&A is a key priority for the company and a focus of our strategic capital deployment,” Stanley Black & Decker Chief Executive James Loree said in the statement.

The company on Wednesday also reported fourth-quarter earnings per share of $1.32, lagging analysts’ expectations of $2.18, according to Refinitiv.

Stanley Black & Decker shares were down 3.1% in early trading in New York.

Reuters had reported on the talks between Stanley Black & Decker and CAM earlier this month.

Reporting by Joshua Franklin in New York; Editing by Dan Grebler