The Stanley Works and The Black & Decker Corp. have entered into a definitive merger agreement to create Stanley Black & Decker, an $8.4 billion global industrial leader in an all-stock transaction valued at approximately $4.5 billion.

Under the terms of the transaction, which has been approved by the boards of directors of both companies, Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley common stock for each share of Black & Decker common stock they own, representing an implied premium of 22.1 percent to Black & Decker’s share price as of Friday, October 30, 2009. Upon closing, which is expected in the first half of 2010, Stanley shareholders will own approximately 50.5 percent of the equity of the combined company and Black & Decker shareholders will own approximately 49.5 percent. The nine members of Stanley’s current Board of Directors will be joined by six new members from Black & Decker’s board.

Stanley’s John F. Lundgren will be president and continue as CEO of the combined company. Nolan D. Archibald, chairman, president, and CEO of Black & Decker will be executive chairman of the combined company for three years.

“This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform,” Lundgren said. “Stanley and Black & Decker together will have a comprehensive offering across all major tool categories and greater resources to support continued expansion of our combined security and industrial businesses. The transaction is expected to create tremendous value for shareholders of both companies through the realization of significant cost synergies, operating margin expansion and enhanced growth opportunities. Joining these two companies together creates a powerful engine for growth, both as markets around the world recover and over the long-term.”

“While we are pleased with the initial premium of approximately 22 percent, the driving motivation of the transaction is the present value of the $350 million in annual cost synergies and the combined financial strength and product offerings of the merged companies,” Archibald said. “The complementary product and market fit of these two companies creates significant value for both companies’ shareholders that neither company can accomplish on a stand-alone basis. Joining forces with Stanley brings together two world-class companies with rich histories and strong track records in a one-of-a-kind opportunity to create outstanding benefits for our respective shareholders, customers and employees.

“We are excited by the opportunity to combine Black & Decker’s unmatched lineup of power tools and security hardware with Stanley’s leading franchise of hand tools and security products and services in a transaction that is both strategically compelling and financially attractive to the stakeholders of both companies,” Archibald continued. “In addition to the new company’s iconic brands, we each share a common heritage and passion for developing innovative products that meet the evolving needs of our end users, along with a commitment to operational excellence that will make us a supplier of choice across these categories.”

Combining Stanley and Black & Decker will enhance both companies’ core strengths and provide increased resources to invest in growth opportunities, the companies said in a joint press release.

Comprehensive Portfolio Of Iconic Brands. Combining the significant brand equity inherent in both companies will create a supplier of choice for tools, with even greater worldwide recognition and appeal among retailers, commercial customers and individual consumers.

Complementary Global Product And Service Offerings. Black & Decker’s position in power tools, security hardware products and engineered fasteners fits seamlessly with Stanley’s product and service offerings in hand tools and mechanical and electronic security solutions, with no significant overlap in product lines.

Stronger, More Diversified Global Company. The combined company will have greater scale in hand and power tools and storage, mechanical and electronic security, as well as a continued strong presence in engineered fasteners and plumbing products. It will also have a broader geographic sales footprint with additional strength in emerging markets; a world-class innovation process; global low cost sourcing and manufacturing platforms; a shared commitment to operational excellence; and a proven business management strategy in the Stanley Fulfillment System.

Significant Shareholder Value Creation. The combination is expected to result in earnings per share (EPS) accretion of approximately $1.00 by the third year after closing, as shareholders of both companies share in the upside potential of the combined company, including approximately $350 million in estimated annual cost synergies fully realized within three years. These will be primarily derived from reductions in corporate overhead, business unit and regional consolidation, manufacturing and distribution, and purchasing. In addition, through the implementation of the Stanley Fulfillment System across Black & Decker’s businesses, the Company expects to achieve significant improvements in working capital and asset efficiency, as well as complexity reduction. The combination is expected to generate approximately $1.0 billion in free cash flow annually by the third year after closing. Over the long term, this will be used to invest in shareholder value creation opportunities, including further investment in security solutions, engineered fastening, and other high-growth platforms.

Enhanced Financial Strength. The combined company will benefit from greater scale and efficiencies in its tool business, higher margins and stable earnings generated by its growing security segment, a highly diversified revenue base across geographies and business lines, and its strong financial position. The Company will target a strong investment grade credit rating. With its substantial cash flow and long history of paying consecutive dividends, the new company expects to maintain Stanley’s current dividend policy.

The combined company will retain a presence in both Connecticut and Maryland, with its corporate headquarters in New Britain and the Power Tools headquarters remaining in Towson.

Additional information on the transaction can be found at www.stanleyblackanddecker.com.