Randomly Noted

Stanley Works is acquiring Black & Decker, and Peet’s Coffee & Tea is buying Diedrich Coffee. One deal is valued at $4.5 billion, the latter “only” about $213 million. Three of the four are familiar brands, especially the tool makers; Peet’s coffee and cafes are especially well-known in California. Diedrich specializes in single-cup coffee, and plays mainly in the wholesale market; single-cup has become enormously popular in recent years. Both transactions come as it becomes increasingly clear the economic recovery will be long and slow; people won’t be opening their wallets with gusto for several years. Not surprisingly, the proposed mergers bring opportunities for cutting costs. But it’s worth noting that the corporate buyers are paying up: Black & Decker’s being sold at a 23% premium, Diedrich for 28% over its closing share price. My colleagues at the WSJ’s Deal Journal blog posit that Stanley covets Black & Decker’s $800 million cash stash. This is prudent: American consumers are still reeling from the past year’s job- and retirement-fund losses. Home construction and renovation remain weak. The bright minds at Stanley know they need to remain in something of a defensive crouch. Stanley and Black & Decker tools are pricier than the various discount alternatives one can find. Ditto coffee: Buying a hulking tin of java at Cosco will remain a more appealing alternative to boutique brands for some time. That said, in buying Diedrich, Peet’s appears to be diversifying – into single-cup. It’s a fairly bold strategic play, actually, and in this sense differs from Stanley’s more conventional move on Black & Decker. It will be worth watching to see if the next few merger deals fall into the Stanley, or Peet’s, category.