Spear & Jackson, Inc. Business Information, Profile, and History

Company Perspectives:

Manufacturing quality hand tools since 1760.

History of Spear & Jackson, Inc.

Spear & Jackson, Inc. is one of the world's oldest manufacturers of hand and garden tools, and also makes magnetic equipment and measuring tools. The firm's brands include Spear & Jackson garden tools, Neill hand tools, Elliot Lucas pincers and pliers, Robert Sorby wood turning tools, Moore & Wright precision tools, Eclipse magnetic equipment, and Bowers measuring tools and bore gauges. Headquartered in Florida, Spear & Jackson's operations are primarily located in the United Kingdom.

Beginnings

The roots of Spear & Jackson date to 1760, when drapery maker John Love decided to found a steelmaking company in Sheffield, England, where that country's production of steel, cutlery, and tools were becoming centered due to an abundance of raw materials. He was joined in the business by Alexander Spear, a wealthy merchant from the nearby town of Wakefield, and the new firm took the name Spear & Love.

Over the following decades the company came to focus on producing saws, and business grew. In 1814, with the firm now run by Alexander Spear's nephew John Spear, an apprentice named Sam Jackson was added. Jackson proved a capable assistant, and in 1830 the company was renamed Spear & Jackson.

The firm continued to produce saws and other tools throughout the 19th and into the 20th century. In 1962 the company acquired Brades Nash & Tyzack Industries Ltd., and in 1971 bought Spearwell Tools. In 1974 two firms, John Bedford and AMV, were also acquired. The year 1985 saw Spear & Jackson purchased by the James Neill Group following a heated takeover battle.

Neill had been founded in 1889 by accountant James Neill, who like John Love had decided to change careers and become a steelmaker. He spent the better part of a decade developing a patented process for making "composite steel," which combined the best qualities of steel and iron. In 1909 he registered the trademark Eclipse (after a famous British racehorse of the 1760s), and in 1911 began making the world's first composite hacksaw blade. Neill continued to make improvements in his designs, and in 1924 the firm introduced a hacksaw frame design, the 20T, which was later adopted as the standard shape for this type of tool.

In 1914 Neill had been approached by the British government to produce magnets for use in engines, as the country was then at war with Germany, their primary producer. After the cessation of hostilities the company continued to make magnets under the Eclipse name, and in 1934 its engineers developed a new mechanically switchable magnetic chuck. This patented invention proved a great advancement in the manufacture of grinding machinery, and was soon being sold around the world, bringing the firm significant revenues. Eclipse later branched out into production of other types of magnetic tools and magnet products.

Over the years Neill made a number of acquisitions, including William Smith Tool & Steel Co., Ltd. in 1948, Standard Hacksaw Ltd. and the John Shaw Group (which included Moore & Wright and Britool Ltd.) in 1970, and Elliot Lucas, Ltd. in 1971. In 1989, four years after it acquired Spear & Jackson, the Neill Group purchased the French firm Forges de Lavieu and the German company Wilhelm Abt. That same year the descendants of James Neill sold their business holdings to Apax Partners for £78 million. At this time the combined firms employed 2,000, mainly in Sheffield.

The early 1990s saw tool and magnet sales decline due to an economic recession, and in 1992 Jeffrey Wilkinson was put in charge of the James Neill Group to revive its sagging fortunes. Over the next several years he was able to boost the firm's results from £3 million in annual losses to a profit of £6 million by selling off money-losing operations like Britool and by investing £5 million in improvements to the firm's manufacturing processes.

In 1995 the Neill Group was renamed Spear & Jackson, Ltd. By this time, the company's annual sales had grown to £74.6 million, and profit stood at £2.45 million. The firm's various units offered nearly 2,000 different products that were manufactured at four sites in the United Kingdom and France, and distributed to 120 countries internationally. Employment had fallen to 1,200, with 750 workers remaining in Sheffield.

U.S. Industries Buys Firm in 1997

In December 1997 Spear & Jackson was purchased by U.S. Industries, Inc. (USI) for cash and stock worth £63.75 million ($107 million). USI, formed in 1995 from some 30 former units of the British conglomerate Hanson Plc, had $2.3 billion in annual revenues from such companies as Lighting Corporation of America, bath fixture maker Jacuzzi, and Ames Lawn & Garden Tools, the U.S. market leader. Spear & Jackson soon began distributing Ames tools in the United Kingdom and to about 120 other countries where it had a strong presence including France, Australia, and New Zealand.

In early 1998 Spear & Jackson's Sheffield factory and headquarters moved into a new £8 million facility, which boasted £1 million worth of new equipment. The year saw export sales boosted by the introduction of the first dedicated sharpening machine for tools used in the steel industry. The machines, which cost £50,000, could sharpen blades as long as eight meters in diameter.

The year 1998 also saw the company's Eclipse Magnetics unit launch Supermill, a high-powered heavy-duty chuck line that helped double or triple production output for some customers. The product was recognized with the 1998 Manufacturing Industry Achievement Award for Mechanical Engineering Innovation. The following year, Eclipse Magnetics acquired Magnacut, Ltd., a magnet processing firm.

In September 2000, with debt-laden USI's stock falling, that firm announced it would spin off several units to shareholders, including Spear & Jackson. The move was delayed for over a year, however, while larger companies such as Ames Lawn & Garden were sold. After the firm's commercial saws division was sold in March 2001, in August 2002 Spear & Jackson was sold to a Florida-based company called MegaPro Tools, Inc. for a 29.5 percent stake in the latter, which was valued at less than $8 million.

For 2002 Spear & Jackson recorded revenues of $87.9 million, down from the $95.5 million of a year earlier. The reported loss of $3.5 million was a sizable improvement over the $13.5 million lost in 2001.

Not long after making the acquisition, MegaPro Tools changed its name to Spear & Jackson, Inc., whose stock would now trade on the U.S. over-the-counter market. Florida resident Dennis Crowley, the owner of MegaPro who had engineered the reverse takeover, took the titles of CEO, board chairman, secretary, and treasurer of the 240-year-old British firm.

Over the following months a stream of press releases was issued announcing new products, including The World's Strongest Shovel and a new line of power tools, as well as sizable orders from chains including Super Cheap Auto in Australia, Bauhaus in Turkey, Tesco in the United Kingdom, and OBI in France. The firm had, however, also lost its largest U.K. customer, wholesaler Toolbank.

The apparent growth of Spear & Jackson as reported in its press releases helped send the stock price soaring, and it increased by more than 200 percent over a year's time, eventually hitting nearly $16 per share. In July 2003 stock watchdog web site Stocklemon.com released a report alleging improprieties in the firm's accounting practices and in its disclosure of certain facts to shareholders. CEO Dennis Crowley, who owned approximately two-thirds of the firm's stock, had been banned for life from the securities industry in 1991 for giving faulty advice to investors, but had not revealed this information when he took control of the company. Stocklemon.com also criticized Crowley's relationship with International Media Solutions (IMS), which was promoting Spear & Jackson stock, noting that IMS principals Yolanda Velazquez and Kermit Silva had received stock as part of their compensation.

SEC Forcing CEO to Step Down in 2004

Shortly after the Stocklemon.com report was published, the U.S. Securities and Exchange Commission (SEC) launched a formal investigation into Spear & Jackson's activities. In April 2004 the SEC filed a restraining order barring Crowley from serving as an officer or director of a public company, and put in place a court-appointed monitor. Crowley, Velazquez, and Silva's assets were also frozen, and their passports seized.

The agency alleged that Crowley had sold $3 million worth of improperly obtained company stock through accounts in the British Virgin Islands, and that IMS had sold $1.6 million in stock it received from Crowley. The price had allegedly been hyped upward by a combination of false statements about financial progress made by Crowley and by the efforts of IMS sales agents, who had convinced investors they were impartially recommending the stock when they were actually receiving a commission of up to 10 percent for sales of its shares. Spear & Jackson was cited by the SEC for its failure to report the full extent of Crowley's ownership of the firm.

The company's stock price was soon in freefall, and by year's end it had dropped to less than a quarter of its earlier peak value. A number of class-action lawsuits were also being filed against the firm by unhappy shareholders. After denying ownership of the offshore accounts or a relationship with IMS, in February 2005 Crowley agreed to settle with the SEC, admitting no guilt but paying the $4.1 million he had received from the company plus a $2 million civil penalty. He also agreed to sell the six million shares he owned in Spear & Jackson back to the company for $100, and was permanently banned from holding a position as a director or officer of a public company. IMS and Velazquez agreed to settle with the SEC as well, paying a total of $2.4 million. The money would be placed in a fund to reimburse defrauded investors. Spear & Jackson itself was not forced to pay any fines, but was admonished to strictly adhere to SEC rules in the future.

Following Crowley's removal, the firm's board put its Florida office and a small warehouse facility there up for sale. The return of Crowley's shares, which constituted 51 percent of the total, effectively boosted the stake owned by the remnants of USI, now known as Jacuzzi Brands, Inc., to 61.2 percent. Jacuzzi Brands immediately announced plans to sell its stake in Spear & Jackson within a year's time. Some months earlier, management of two of the firm's largest subsidiaries had offered $26 million to buy those units back from the parent company, and this remained a possible option.

For the fiscal year ending in September 2004, the firm had reported revenues of $101.2 million and net earnings of $436,000, an improvement over previous years that was largely attributed to currency fluctuation between markets. Garden, digging, and cutting tools made up the largest share of revenues, at 31 percent, while industrial cutting tools accounted for 20 percent, metrology tools and products 15 percent, and electrical tools about 12 percent. The Neill Tools unit took in $44.4 million in 2004, Bowers Metrology $15.4 million, Eclipse Magnetics $9.4 million, Robert Sorby $5.1 million, Spear & Jackson Australia and Spear & Jackson New Zealand a combined $17.4 million, and Spear & Jackson France $9.6 million.

With nearly 250 years of history behind it, Spear & Jackson, Inc. was looking to right its ship and move forward after several changes of ownership and a devastating stock promotion scandal. Ownership was likely to revert to management, and the possibilities for a return to stability looked positive.

Principal Subsidiaries: Spear & Jackson Plc (U.K.); Bowers Group Plc (U.K.); S and J Acquisition Corp.; Bowers Metrology Ltd. (U.K.); Bowers Metrology UK Ltd. (U.K.); Coventry Gauge Ltd. (U.K.); CV Instruments Ltd. (U.K.); Eclipse Magnetics Ltd. (U.K.); Spear & Jackson (New Zealand) Ltd.; James Neill Canada, Inc.; James Neill Holdings Ltd. (U.K.); James Neill U.S.A., Inc.; Spear & Jackson (Australia) Pty Ltd.; Magnacut Ltd. (U.K.); Neill Tools Ltd. (U.K.); Spear & Jackson Garden Products Ltd. (U.K.); Spear & Jackson Holdings Ltd. (U.K.); Spear & Jackson France S.A.; Societe Neill France S.A.; C.V. Instruments Europe BV (Netherlands).

Principal Competitors: The Stanley Works; Fiskars Corp.; Ames True Temper Inc.; Mitutoyo America Corp.; Pfeil; Henry Taylor Tools, Ltd.

Chronology

• Key Dates:
• 1760: John Love and Alexander Spear form steel company in Sheffield, England.
• 1830: Firm is renamed Spear & Jackson in honor of new partner Sam Jackson.
• 1889: James Neill founds steelmaking business in Sheffield.
• 1911: Neill introduces Eclipse composite steel hacksaw blades.
• 1934: New Eclipse switchable magnetic chuck boosts Neill's revenues.
• 1970: Neill acquires John Shaw Group including Britool and Moore & Wright.
• 1985: James Neill Group purchases Spear & Jackson.
• 1989: Apax Partners acquires Neill Group.
• 1995: Neill Group is renamed Spear & Jackson Plc.
• 1997: U.S. Industries purchases firm.
• 1998: Sheffield operations move into new facility.
• 2002: U.S. Industries sells firm to Dennis Crowley's MagnaPro Tools.
• 2005: Crowley pays $6.1 million Securities and Exchange Commission (SEC) fine, sells majority ownership back to firm.