Is Stanley Black & Decker Preparing to Saw Off Its Security Business?

NEW YORK (The Deal) -- Investors have been speculating about a potential Stanley Black & Decker (SWK) split since the day the company was formed back in 2010. Last week, it dropped a hint that it is listening to those calls, and preparing to act.

Stanley Works timed the market well with its $4.5 billion purchase of Black & Decker, bulking up on power tools and construction gear ahead of a rebound in the housing market. But the New Britain, Conn.-based company in recent years has at times had trouble meeting Wall Street's expectations, prompting plenty of suggestions about ways it could boost its share price.

The company's security business, which represents just under 20% of total sales and a smaller percentage of EBITDA, has been blamed for some of those earnings misses, and has long been the subject of spinoff and sale talk. During its investor day on May 15 just outside Baltimore, company officials seemed to signal they are taking the idea of a split seriously.

Stanley Chairman and CEO John F. Lundgren said that while its security business -- which was pieced together via more than 50 acquisitions -- still aligns with its overall strategy, the company needs to prove that it can produce strong margins and organic growth. He said that by mid-2016, it will be time to "reevaluate" security and its fit in the overall portfolio. "We have to prove that it can continue to grow and meet our profitability trends," Lundgren said.

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