Connecticut Coming to Stanley’s Defense
The Stanley Works has been a New Britain institution since its founding. While it expanded and established plants outside of the city, its headquarters remained rooted in New Britain, contributing to the city’s nickname of the “Hardware City.” Therefore, its history and its prominent standing as a manufacturer of hardware make it difficult to conceive of the possibility that Stanley could have been uprooted after a merger with another prominent company.
In the early 1980s, Newell Inc., a then-Illinois-based company that originally manufactured curtain rods, expressed interest in The Stanley Works. Through the purchase of stock in 1981, Newell acquired Stanley’s drapery hardware division. In June 1982, the United States District Court of Connecticut filed a complaint with the United States serving as the plaintiff and Newell Companies, Inc. as the defendant. The complaint focused on the acquisition of Stanley’s drapery hardware division because both companies are within the top six of the industry’s manufacturers. As the top six companies that manufacture drapery hardware account for 96 percent of the output in the market, the complaint cited the Clayton Antitrust Act of 1914, which restricts the power of monopolies and encourages competition in the market. To ensure that Newell did not monopolize the market in this industry, the United States, as the plaintiff, demanded that Stanley’s drapery hardware division be restored to maintain competition.
Throughout the eighties, Newell acquired more companies, employing a strategy referred to as “Newellization.” After the acquisition of a company or a division of a company, there would be reductions through lay-offs or closing plants to improve profit and centralize their administration. Before The Stanley Works’ merger with Black & Decker to become the Stanley Black & Decker Company that remains today, Newell attempted to merge with them independently. In 1991, Newell invested $150 million in the Black & Decker Corporation, which equated to a 15 percent stake in the company. However, once they attempted to achieve the same result at Stanley, they were interrupted by the company, which had the support of the state as well.
Discussions began in 1989 between the chief executives of the two companies to discuss the possibility of a merger, but it was ultimately decided against by Stanley's leaders. Therefore, Newell’s attempt at gaining 15 percent of stakeholder control and acquisition of Stanley’s hardware division was deemed a “hostile takeover,” which refers to an acquisition of a company without the consent of their board of directors. Stanley did not want to lose its independence, and there was a fear that “Newellization” would apply to the company and its approximately 2,000 workers in Connecticut. This fear threatened Stanley’s headquarters in New Britain, so after initiating litigation against Newell, the company turned to the State of Connecticut to prevent the takeover. In 1992, Richard Blumenthal was Connecticut’s Attorney General and decided to file an injunction with the company, which resembled the complaint from 1982 as it cited Newell’s violation of state and federal antitrust laws. However, it also emphasized Stanley’s significance in Connecticut’s economy.
Before the litigation pressed further, it was settled with Newell with the additional requirement that Newell must not encroach on Stanley for ten years. However, by the end of the decade, Newell embarked on a new acquisition—a $6 billion merger with Rubbermaid. The infamous merger followed a similar “Newellization” trajectory and led to a decline in stock prices. Ultimately, in 2017, Stanley Black & Decker purchased Newell’s tool division for $1.95 billion, acquiring Irwin, Lenox, and Hilmor tools.
While Stanley received support from Connecticut to avoid the Newell acquisition, it has also received criticism and faced litigation from the state. In 2002, Blumenthal as the Attorney General and Denise Nappier, the state’s Treasurer, filed a lawsuit against the company because of their proposal to move their headquarters to Bermuda as a means of corporate inversion to pay less taxes. Despite the stakeholders narrowly voting in favor of the move, Stanley stopped the proceedings for the move because of the Connecticut officials' lawsuit, and the proposed investigation from the Securities and Exchange Commission. Stanley’s headquarters remain in New Britain, remaining a fixture of Connecticut’s economy and New Britain’s industrial history.
Quotes
David Ayers (Chief Executive Officer of Stanley): “Even though Mr. Ferguson committed to confidentiality and claimed friendly intent, he subsequently publicly discussed the contents of these meetings and quietly began to acquire Stanley stock. These acts reflect his true intentions, his dishonesty, and Newell’s hostility.” (“Stanley Works Chief Says Newell Merger Would Cause Upheaval.” The Hartford Courant, 4 Aug. 1992.)
Ayers: “Stanley’s philosophy is to cater equally to the needs of all channels of distribution. …We compete just as hard for the business of the corner hardware store or lumber yard on Main Street.” (“Stanley Works Chief Says Newell Merger Would Cause Upheaval.” The Hartford Courant, 4 Aug. 1992. )
Stanley’s Board of Directors in a letter to Newell: “We are aggravated that because of you, Stanley must incur expenses to maintain its independence, vindicate its legal rights, prevent harm to its constituencies, and preclude the illegality that would result from Newell’s combining with or attempting to control or influence Stanley. We will continue to vigorously resist your efforts to effect a combination of any kind with Stanley.” (Ziemba, Stanley. “Stanley Works Bristles at Latest Newell Advance.” The Chicago Tribune, 19 Sept. 1992.)
Daniel Ferguson (Chief Executive Officer of Newell): “I have always believed—then, as I believe now—that, hey, this is a very effective combination, if we can ever get it together some way.” (“Stanley Started Talk of Merger, Rival Says .” The Hartford Courant, 21 Dec. 1991.)
Ferguson: “The interest in Stanley has been there for a long time. If it happens now, great. If it doesn’t happen now, maybe it will happen in 1995.” (“Stanley Started Talk of Merger, Rival Says .” The Hartford Courant, 21 Dec. 1991.)
William D’Amico (Newell’s lawyer): “Clearly, Attorney General Blumenthal has not been listening to Mr. Ayers, because Mr. Ayers has not been giving assurances that Stanley will be an employer in the State of Connecticut. One thing that I am sure of is that should there be a combination of Newell, that Newell would clearly help energize Stanley and that would mean energizing Stanley as an employer in Connecticut and elsewhere.” (“Blumenthal Sues Stanley Suitor Newell Co. .” The Hartford Courant, 2 July 1992.)
Further Reading
“State Considers Helping Stanley Hold Off Newell .” The Hartford Courant, 11 June 1992, https://www.courant.com/1992/06/11/state-considers-helping-stanley-hold-off-newell/.
Associated Press. “Company News; Newell to End Hostile Bid for Stanley Works.” The New York Times, 3 Oct. 1992, https://www.nytimes.com/1992/10/03/business/company-news-newell-to-end-hostile-bid-for-stanley-works.html.
“Blumenthal Sues Stanley Suitor Newell Co. .” The Hartford Courant, 2 July 1992, https://www.courant.com/1992/07/02/blumenthal-sues-stanley-suitor-newell-co/.
Johnston, David Cay. “Stanley Works Faulted Again By 2 Officials Of Connecticut.” The New York Times, 4 July 2002, https://www.nytimes.com/2002/07/04/business/stanley-works-faulted-again-by-2-officials-of-connecticut.html.
“Stanley Started Talk of Merger, Rival Says .” The Hartford Courant, 21 Dec. 1991, https://www.courant.com/1991/12/21/stanley-started-talk-of-merger-rival-says/.
“Stanley Works Chief Says Newell Merger Would Cause Upheaval.” The Hartford Courant, 4 Aug. 1992, https://www.courant.com/1992/08/04/stanley-works-chief-says-newell-merger-would-cause-upheaval/.
Townsend, Matthew. “Stanley Black & Decker to Buy Newell Tools for $1.95 Billion.” Bloomberg.Com, Bloomberg, 12 Oct. 2016, www.bloomberg.com/news/articles/2016-10-12/stanley-black-decker-to-buy-newell-tool-unit-for-1-95-billion.
Ziemba, Stanley. “Stanley Works Bristles at Latest Newell Advance.” The Chicago Tribune, 19 Sept. 1992, https://www.chicagotribune.com/news/ct-xpm-1992-09-19-9203250414-story.html.
