The agreement announced Thursday calls for Stanley to pay $525 million when the deal closes later this year.
CHICAGO — Sears Holdings will sell its well-known Craftsman tools brand to Stanley Black & Decker, the latest in a recent flurry of moves the retailer is making to generate cash after at least five money-losing years.
The agreement announced Thursday calls for Stanley to pay $525 million when the deal closes – expected later this year – and another $250 million after three years, the companies said. New Britain, Conn.-based Stanley will pay Sears a percentage of its new sales of Craftsman products for 15 years, and during that time, Sears will be able to continue selling Craftsman products royalty-free.
Sears, headquartered in suburban Chicago, estimated the deal's value could top $1 billion.
Separately Thursday, Sears said it's trying to raise another $1 billion by selling off real estate. On Wednesday, affiliates of the hedge fund managed by Sears' chairman, CEO and biggest investor, Edward Lampert, lent Sears up to $500 million to fund operations while it negotiates those sales.
Sears announced in May that it was looking for ways to wring more cash from some of its best-known brands – Craftsman, Kenmore and DieHard.
Craftsman still accounted for the largest share of the hand tools and accessories market by dollar share as of September, with about 26.6 percent, and accounts for about 8.3 percent of portable power tool sales, according to Stevenson TraQline, a market research firm. But its share in both categories declined nearly 6 percent over the last four years, shrinking alongside Sears' sales.
Currently, about 90 percent of Craftsman products are sold through Sears, Kmart and Sears Hometown stores, Stanley President and CEO James Loree said in a conference call Thursday. Much of the 10 percent sold outside Sears-related channels is sold through Ace Hardware stores.
Craftsman's appeal might be slightly stronger with older customers who remember it from decades ago, when the Sears catalog's role was similar to that of e-commerce today, Loree said. But he estimated the brand could add about $100 million of revenue growth per year for the next 10 years, in part by making Craftsman products more widely available.
"The world has changed, but Craftsman is still an incredibly strong brand," he said.
Stanley is working on plans to begin expanding Craftsman's distribution but currently sells Stanley and Black & Decker brands to some of the biggest home and hardware retailers, including Home Depot, Lowe's and Amazon.
The availability of Craftsman products outside of Sears could give shoppers even less reason to venture into its department stores. But those sales will generate cash for Sears, said Craig Johnson, president of consulting and research firm Customer Growth Partners.
"If the concept is to monetize some of Sears' assets, it's hard to think of a better partner to make that happen than a company like (Stanley)," he said.
Sears has sold off multiple assets to try to turn itself from a traditional department store chain with a big brick-and-mortar footprint to a nimbler retailer focused on membership and online sales.
The company previously spun off its Sears Hometown & Outlet and Lands' End businesses. In 2015, it sold 235 stores to a real estate investment trust spinoff, Seritage Growth Properties, and raised $2.72 billion.
On Wednesday, Sears said it would close 150 unprofitable stores.
Last week, affiliates of Lampert's hedge fund, ESL Investments, also recently gave the retailer a $200 million letter of credit that could be expanded to $500 million.
Lampert and his hedge fund's loans to the retailer add up to more than $1 billion since September 2014.
Sears did not make Lampert available for an interview.