Proposed deal is $40-share; maker of ATMs had rebuffed earlier overture
NEW YORK (MarketWatch) - United Technologies Corp. proposed to acquire Diebold Inc., the producer of automatic teller machines, voting terminals, retailing systems and other technology, for $40 a share, or $2.63 billion.
In a statement late on Sunday, United Technologies (UTX) , the Hartford, Conn., industrial and technology giant, laid out its proposal to acquire Diebold, which is based in North Canton, Ohio.
It made the public proposal after Diebold's board rebuffed an earlier takeover overture from United Technologies.
United Technologies also has told Diebold that if it could conduct a due-diligence financial review, it might be prepared to boost the $40 deal price.
That $40 price is 66% above Diebold's (DBD) closing price Friday of $24.12. In premarket trading Monday, shares were up 65% to $39.83 while United Technologies shares remained unchanged at $70.51.
In the past year, Diebold's shares touched a high of $54.50 last July and a low of $23.07, on Jan. 23, 2008.
UTX says its proposal is fully financed. The deal would be conditioned on a due-diligence review of Diebold and on regulatory clearances, United Technologies said.
"Diebold represents an excellent fit with" United Technologies, UTX Chairman and Chief Executive Officer George David said in the Sunday statement.
United Technologies makes its case
In a letter dated Feb. 19, which United Technologies made public, David proposed to Diebold Chairman John N. Lauer a deal at "a significant premium to the current trading price."
David said that UTX's "resources and presence in markets globally would be significant assets" in helping Diebold expand worldwide and build profitability.
United Tech sees complementary characteristics between several of its businesses and Diebold. For one, UTX's Otis Elevator has a 400-location network of offices and service centers. And Carrier air conditioners and UTC Fire and Security have comparable business models, United Tech said.
United Tech also called itself "exceptionally technology intensive," spending more than $3.5 billion a year on research and development.
Financing would come from cash on hand and other "readily available" sources, the letter said.
In a Feb. 21 response, Lauer said Diebold's board took up United Tech's proposal "extensively" at a regular meeting. The directors voted unanimously that pursuing a combination with United Technologies "was not in the best interests" of Diebold or its holders, Lauer's letter said.
Eight days later, David told Lauer that after due diligence, United Technologies might be prepared to go beyond $40 a share. And he said that if UTX couldn't talk with Diebold's board, it would take the matter directly to Diebold's holders, which according to regulatory filings include mutual fund giant Fidelity Investments and Cooke & Beiler, a Philadelphia investment firm.
Early in February, Diebold estimated 2007 revenue at $2.95 billion, which would rise 6% to 8% in 2008. The company had said it was disappointed with the revenue growth it posted for 2007. And it also said it would cut about 5% of its global workforce to reduce costs.
Diebold also said then that the board's audit committee and regulators were continuing to review the company's accounting.
Morgan Stanley is advising United Technologies on the takeover proposal.