Stanley Works (NYSE: SWK) has cancelled the sale of its Israeli subsidiary ZAG Industries Ltd., a plastics products manufacturer, to Fox Paine & Company LLC. Stanley Works notified Deutsche Bank representative in Israel Dr. Boaz Schwartz, who was handling the negotiations, to this effect.
Stanley Works made the sale of ZAG, at a company value of $140 million, conditional on the sale of its loss-making Canadian subsidiary, which has $20 million in sales. Stanley Works recently agreed to lower its asking price for ZAG to $110 million ($120 million including related costs). It would go no lower, even after it became clear during the negotiations that ZAG’s preliminary presentation did not include material items that would require a reduction in value, such as the exclusion of marketing costs in ZAG’s primary market, the US, and the losses by the Canadian company.
Stanley Works acquired 94% of ZAG from its founder Zvi Yemini in 1999 at a company value of $140 million. ZAG was traded on Nasdaq at the time, and was delisted following the sale. Stanley Works later acquired Yemini’s 6% stake in the company.
Sources close to the negotiations said ZAG’s activities were insubstantial relative to Stanley Works’ total business, so it was not willing to sell the company at a loss. Instead, Stanley Works will try to improve ZAG’s results before trying to sell it again.
Published by Globes [online], Israel business news - www.globes.co.il - on June 8, 2006
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