The Stanley Works and Black & Decker announced today they will merge to create Stanley Black & Decker, an $8.4 billion global tool company. The deal is worth $4.5 billion, the companies said in a joint news release.

"Stanley Black & Decker together will have a comprehensive offering across all major tool categories and great resources to support continued expansion of our combined security and industrial businesses," stated John F. Lundgren, chairmen and CEO of Stanley, who will be president and CEO of the combined company.

While the deal is described as a merger, Stanley will be in the driver's seat. Aside from the fact that Stanley's CEO will run the firm, the all-stock transaction calls for Black & Decker shareholders to get 1.275 shares of Stanley common stock for every share of Black & Decker stock. The companies said that represents a premium on Black & Decker's share price.

Once the transaction occurs, Stanley shareholders will own about 50.5% in the equity of the combined company and Black & Decker shareholders will own about 49.5%. In addition, the new board of directors will consider of nine members of Stanley's board and six members of Black & Decker's.

The firms said they expected the merger will lead to $350 million in "cost synergies" and increase earnings per share by $1 per share in three years. The deal is expected to close in the first half of 2010.

Stanley imakes hand tools for the construction, security, industrial and do-it-yourself markets. Its brand names include Stanley, FatMax, Bostitch, Facom, Proto, Mac Tools, Sonitrol, Stanley Security Solutions, Best, and Vidmar. Aside from its own brand name, Black & Decker brands include DeWalt, Porter-Cable, Emhart Teknologies, Kwikset, Baldwin, and Price Pfister.

While Stanley's Lundgren will be president and CEO of the new firm, Black & Decker chairman, president and CEO Nolan Archibald will become executive chairman.

"The complementary product and market fit of these two companies creates significant value for both companies' shareholders that neither company can accomplish on a stand-alone basis," Archibald said. "Joining forces with Stanley brings together two world-class companies with rich histories and strong track records in a one-of-a-kind opportunity to create outstanding benefits for our respective shareholders, customers and employees."

The deal, which has been approved by the boards of both companies, now must be approved by shareholders of both firms and get cleared by regulators.