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POWER PLAY

Black & Decker Corp., the nation's top power tool manufacturer, announced a deal yesterday for its biggest acquisition in more than a decade, a $775 million cash purchase of Pentair Inc.'s Tools Group.

The acquisition will help the Towson-based toolmaker sell more power tools for use in the booming commercial construction industry, the company said yesterday.

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Black & Decker, which sells its own brand of power tools for consumers as well as the DeWalt professional line, will gain several big-name brands, such as Porter-Cable and Delta. The Tools Group of Minnesota-based Pentair had sales of $1.08 billion and operating profit of $82 million in 2003.

Black & Decker yesterday also reported record net earnings from continuing operations of $121.8 million, or $1.50 per diluted share, for the second quarter, a 56 percent jump compared with the second quarter of 2003. Analysts had expected earnings of $1.26 per share. Sales from continuing operations were a record $1.3 billion, up 11 percent excluding the effects of foreign currency and acquisitions.

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Shares of Black & Decker climbed 7 percent yesterday, to $67.49 per share, a 52-week high, in what company officials said showed investors' confidence in the company's strategy to grow through acquisition. The company late last year acquired Baldwin Hardware Corp., an upper-end maker of brass hardware and locks, and Weiser Lock Corp., a line of locks sold at mass retailers.

The latest acquisition "can be a platform for future growth for this company," said Eric Bosshard, director of research for Cleveland, Ohio,-based Midwest Research. "It's a really good acquisition." Analysts said the acquisition makes sense strategically because the products each company makes complement rather than overlap.

The additional brands will expand product offerings in lines where Black & Decker has low market share, including woodworking equipment, compressors, pressure washers and nailers, and will help give the company a strong presence among distributors to the industrial and construction trades, experts said.

"It's a nice acquisition for Black & Decker," said Bob Goldsborough, an analyst at Ariel Capital Management in Chicago, which owns 3.1 million shares of Black & Decker. "They paid a decent price for it. It will definitely add to earnings per share. The market showed that it liked it. The market definitely liked the price Black & Decker paid for it."

During a conference call with analysts yesterday morning, Nolan D. Archibald, Black & Decker's chairman and chief executive officer, said the deal will give Black & Decker significantly more sales volume in the professional and industrial market with a product line that complements the DeWalt line, give the company additional highly respected brands and a greater presence in key distribution channels to industry and construction uses.

"This acquisition is clearly both strategically and financially compelling," he said. "By acquiring businesses in an industry we already know, we can leverage our strengths and create tremendous value."

He said DeWalt's professional power tools and accessories business in North America has benefited over the past decade from the growth of home ownership, increased demand for second homes and more 'do-it-for-me' remodeling as the population ages.

Two of Pentair's brands, Porter-Cable and Delta, work especially well with Black & Decker's DeWalt line because they make woodworking products, such as table saws, routers and sanders, categories in which DeWalt is either new in the market or has a low market share, said Barbara Lucas, a Black & Decker spokeswoman.

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"That's a very attractive market to us," she said. "There's an awful lot of commercial construction going on around the country, so it's a growth market. Plus, it helps to balance our exposure to the retail side, in terms of the economy."

Officials of Pentair yesterday said they had announced plans to explore alternatives for the power tools group in February, when the company decided to focus on its water business, including pumps, water treatment and pool and spa equipment and its enclosure business, production of metallic cabinets that protect electronic equipment.

The Tools Group includes Porter-Cable portable power tools; Delta woodworking machinery; DeVillbiss Air Power, air compressors and pressure washers; Oldham Saw saw blades and router bits; and Flex, a German-based business that makes grinders and masonry and metal working tools.

"Tools had been our largest growth business through the '90s," Randall J. Hogan, Pentair chairman and chief executive officer.

But the water business has been growing faster recently and the company has decided to focus on that, he said. With the Tools Group and Black & Decker's power tools business, "the product fit and the channel fit was just extraordinary ... Black & Decker is a strong brand managerv... so to have premium brands in the hands of a company that knows what to do with them is quite heartening for our people."

Pentair's Tools Group employs 4,200 workers at seven facilities in North America, Europe and Asia, including an operations center in Jackson, Tenn.

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Black & Decker signed the contract to purchase the Tools Group Friday, and hopes to close the deal by the end of the year. The sale is subject to anti-trust clearance by the Federal Trade Commission. Black & Decker expects to file its plans with the FTC by the end of next week, Lucas said.

Archibald said the acquisition will add about 50 cents per share to earnings in 2005 and 25 cents per share in 2006 and in 2007. By nearly doubling the sales volume of the North American professional business, the company will have better scale to improve the profitability of the combined group. The company expects to realize $65 million of annual cost savings by the end of 2007.

The company cut costs by $50 million last year as part of a multiphase restructuring program announced in 2002. This meant completing the closing of a plant in Easton, on the Eastern Shore, and moving product assembly lines from North Carolina to Mexico, and from the United Kingdom to the Czech Republic. This year, the plan calls for achieving savings of $45 million.

BLACK & DECKER

Based: Towson

2003 sales: $4.48 billion

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2003 net income: $293 million

Employees: 22,300

POWER TOOLS & ACCESSORIES SEGMENT

Brands: Black & Decker, DeWalt. Products include Dustbuster, Snakelight, Firestorm and Grass Hog

2003 sales: $3.11 billion

2003 operating income: $350.9 million

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PENTAIR

TOOL GROUP

Based: Jackson, Tenn.

Brands: Porter-Cable and FLEX(Germany) power tools; Delta and Biesemeyer woodworking machines; DeVilbiss Air Power air compressors, power washers, generators and pneumatic tools; Oldham Saw blades and router bits

Employees: 4,200

2003 sales: $1.08 billion

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2003 operating income: $81.8 million


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