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Culminating ongoing discussions and spurred by both companies' financial struggles, power tool maker Black & Decker of Towson agreed this week to be acquired by The Stanley Works of New Britain, Conn., in a multibillion-dollar transaction the companies expect will position them better for the future.

The estimated $4.5 billion all-stock transaction would create a new $8.4 billion combined company, Stanley Black & Decker, and is expected to close in the first half of next year. Corporate headquarters of the new company will be in Connecticut, but company officials said a "major" Black & Decker presence — a company established in 1910 by S. Duncan Black and Alonzo G. Decker with a small machine shop in Baltimore — will remain in Towson as the headquarters of the power tool arm.

However, some 250 Black & Decker employees at its corporate headquarters "will likely not have jobs" when the deal closes, according to Black & Decker spokesman Roger Young. Young said the company has a total of a "little less" than 1,500 employees in Maryland.

All told, the deal will mean the loss of thousands of jobs between the two companies. Black & Decker has about 20,000 employees and Stanley about 18,000.

Stanley spokesman Tim Perra confirmed that reductions would be "less than 10 percent" of the combined work force. The exact number will be not known until after the deal closes, Young said.

Meanwhile, a Dallas law firm announced Tuesday that it has begun an investigation of the deal on behalf of Black & Decker shareholders. The probe concerns "possible breaches of fiduciary duty," according to a statement by Kendall Law Group.

The investigation concerns "whether the consideration to be paid to shareholders is grossly unfair, inadequate, and substantially below the fair or inherent value of the Company and whether the directors and special committee members may have breached their fiduciary duties by not acting in the shareholders' best interests in connection with the sale process," according to the statement.

Kendall officials could not be reached for comment Wednesday. Young said Black & Decker had no comment on the probe.

Under the terms of the transaction, which both boards have approved, Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley common stock for each share of Black & Decker common stock they own, representing an implied premium of 22.1 percent to Black & Decker's share price as of Oct. 30.

While company officials in a conference call announcing the transaction Tuesday said there was "little" overlap in the companies' product lines, Stanley CFO Donald Allan Jr., referring to the $350 million in savings that can be realized over three years, said "there is significant overlap in management and sales forces" and that "there was overlap in distribution markets" such that "we will be able to eliminate certain locations."

"I know this news is unexpected, and I certainly appreciate that it will cause uncertainty about what this means for many of you," said Black & Decker CEO Nolan D. Archibald in a letter to his employees. "We will work to address that uncertainty as quickly as possible, but understandably it will take some time. Decisions affecting people are the most difficult any management team must make. I believe that for the majority of employees, this merger will create excellent career opportunities that come with being part of a larger organization. As soon as more information is available, we will share it with you. For now, you should know that there will be no immediate changes."

John F. Lundgren, chairman and CEO of Stanley, will be president and CEO of the combined company. Archibald is to be its executive chairman for three years.

Stanley, founded in 1843, supplies tools and engineering services for the industrial, construction and do-it-yourself sectors. Black & Decker has specialized in manufacturing and selling power tools and other products under an array of brands including Black & Decker, Dealt, Porter-Cable and Kwikset.

Black & Decker, which laid off about 700 employees nationwide over the last year, recently reported its third-quarter profit fell to $55.4 million from $85.8 million in the prior-year quarter. Sales fell to $1.21 billion from $1.58 billion. Stanley reported its third-quarter net income fell 28 percent to $15 million from $20.8 million in the prior-year quarter, with net sales from continuing operations falling 16 percent to $936 million.

"This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform," Lundgren said in the statement. "Stanley and Black & Decker together will have a comprehensive offering across all major tool categories and greater resources to support continued expansion of our combined security and industrial businesses."

"While we are pleased with the initial premium of approximately 22 percent, the driving motivation of the transaction is the present value of the $350 million in annual cost synergies and the combined financial strength and product offerings of the merged companies," Archibald said in the statement.

Archibald, said Young, is forgoing a $20 million severance payment he was entitled to under the terms of the deal, according to "an agreement between him and the board." Archibald's compensation with the combined company is to include an annual base salary of $1.5 million and up to $1.9 million in annual bonuses, according to Black & Decker information. In addition, he has a pension from Black & Decker worth $35.5 million as well as $15.7 million in a supplemental retirement savings plan, and company stock holdings.

The transaction between the companies includes terms specifying a $125 million termination fee, payable by either party if the deal falls through for certain reasons.