Stanley Black & Decker merger likely to pay off

Question: Now that Stanley Black & Decker Inc.’s merger has taken effect, will my shares keep going up or should I be concerned?

Answer: Stanley Black & Decker, the world’s largest toolmaker, faces the challenge of continued weakness in construction activity and auto sales. But it boasts two of its industry’s top brand names, with a broad and hard-to-match product line of carpenter, mechanic, pneumatic, power and hydraulic tools.

The $4.5-billion acquisition of Black & Decker Corp. by Stanley Works, completed in March, is expected to produce savings of $350 million a year through cost cutting and greater pricing influence.

Over the last three decades the two competitors had considered the possibility of merging from time to time as the tool business became increasingly commoditized.

Meshing two large companies is never easy or immediate, especially during an economic period when customers are cautious about restocking their inventory.

Shares of Stanley Black & Decker have risen 22% this year after surging 55% last year. Its net income fell 34% in the second quarter on merger charges, but the company has seen signs of improvement and has raised its earnings projections.

The combined company has a large foothold in Latin America, where economies have been holding up well. In recent years it has also been reducing ties to the less-predictable consumer market, where large retailers call the shots, and increasing its more-reliable industrial businesses. Stanley acquired European tool manufacturer Facom in 2006.

Of the Wall Street analysts who follow Stanley Black & Decker, four have issued “strong buy” recommendations on the stock, four have issued “buys” and two have issued “holds,” according to Thomson Reuters.

Analysts on average expect the company’s earnings to increase 28% this year and by the same amount in 2011, according to Thomson Reuters. The firm has a strong balance sheet and can cover its interest payments with cash

Stanley Works Chief Executive John Lundgren is CEO of the combined company. Black & Decker CEO Nolan Archibald was named chairman.

The company’s headquarters remain in New Britain, Conn., where the old Stanley was based. Its power-tool offices are the former Black & Decker headquarters in Towson, Md.

Question: Please settle this: How big should an emergency fund for a family be?

Answer: Many financial planners recommend setting aside three to six months of your living expenses for emergencies.

To figure out how much that is, first determine what you are spending each month: your mortgage or rent, homeowners insurance, real estate tax, utilities, car loan payment, credit card payments and groceries.

“Add all of that up, multiply by three to six months and set the money aside in a safe place like a money market fund,” advised Angela Thomson, certified financial planner and president of Coastal Financial Planning Inc. in Lincoln, R.I.

Andrew Leckey answers questions only through the column. E-mail him at yourmoney@tribune.com.