Diebold continues to hold off UTC's $3B offer

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Sunday, March 9, 2008

HARTFORD, Conn.--United Technologies Corp. last week went public with its $3-billion offer to buy Diebold in an attempt to push Diebold's board of directors to consider the offer, which its leaders had previously rebuffed.
In addition to its robust ATM business, Diebold has a security integration arm that has substantial presence in the retail and financial verticals. UTC owns Red Hawk, a security integrator that has high brand recognition in the banking space.
On Feb. 19, UTC made an official proposal to acquire Diebold for $40 per share in cash, representing a total enterprise value of approximately $3 billion. UTC's proposal represents a premium of approximately 66 percent to Diebold's closing stock price on Feb. 29.
In a letter to John Lauer, Diebold's chairman of the board, George David, chairman and CEO of United Technologies, said "we believe UTC's resources and presence in markets globally would be significant assets to Diebold in expanding business worldwide and increasing its margins and profitability."
But Lauer wrote in a March 5 response to David's offer that UTC is "opportunistically seeking value that belongs to Diebold shareholders" and said that the $40 per share offer is 27 percent below the company's 52-week high of $54.50 seven months ago.
But Diebold's stock price has struggled to maintain that high. In January, sources told Security Director News the company was reorganizing its security business and had plans to layoff 1,600 employees. Its price on Feb. 29 was $24.12. On March 6, it recorded a price of $37.33.
If UTC were to secure its purchase of Diebold, it would own a significant piece of the financial security integration space. Darrell Wilson, security director at Truliant Federal Credit Union, said Diebold has been successful in servicing its customers.
"If I call them now and say I have a problem, they will be here in a few hours. They are like the postman; you know they'll show up," he said. "That is where Diebold is succeeding; they cover that market."
Under the ownership of another company, Wilson said Diebold be able to build its success in other areas, such as alarms and video installation, and offer more value-added services to security practitioners.
"From my perspective, if you have a security company that wants full-service --alarms, safes, ATMs -- Diebold is a full-service security company," he said. "If someone would acquire them it could broaden the services it offers to the financial market."
Even though Diebold continues to decline UTC's advances, UTC on March 5 reaffirmed its cash proposal to Diebold and said, "it remains ready to discuss its proposal with Diebold's Board of Directors. UTC's management team, and financial and legal advisors are available to meet with Diebold and begin due diligence immediately."