Stanley Works to Buy Black & Decker

(Updated from Monday with Black & Decker, Stanley premarket quotes.)

NEW BRITAIN, Conn. (TheStreet) - Toolmaker Stanley Works(SWK Quote) will acquire Black & Decker(BDK Quote) in a deal valued at about $3.43 billion.

Under the terms of the acquisition, announced after the closing bell Monday, Black & Decker shareholders will receive 1.275 Stanley shares for each Black & Decker share they own.

At the close of Monday trading, Stanley's stock price stood at $45.15, putting a value on each Black & Decker share of about $57.57. Black & Decker has about 59.5 million shares outstanding.

The companies said the deal represents a 22.1% premium to Black & Decker's closing stock price Friday.

In Tuesday's premarket session, Black & Decker shares spiked 23.7%. They were changing hands recently at $58.55, up $11.21 from their close in Monday's regular session, when they inched higher by 12 cents. Stanley shares, meanwhile, gained 5% in early-hours action Tuesday, trading recently at $47.40.

Already approved by both boards, the combination is expected to close in the first half of 2010, though it still requires the standard blessings of regulators and both sets of shareholders. If the deal goes through, Stanley shareholders will own 50.5% of the resulting company, to be called Stanley Black & Decker.

Stanley's chairman and CEO, John Lundgren, will take the reins of the new concern as president and chief executive, while Black & Decker's CEO, Nolan Archibald, will become executive chairman.

Looking far into the distance, Stanley and Black & Decker said that, by the third year following the deal's closing, the combined company will generate $1 billion in free cash flow. Also in that third year, executives project the merger to add $1 per share to the combined company's bottom line, largely through what it pegs as $350 million in potential cost-saving synergies.