United Tech sets sights on Diebold takeover
United Technologies Corp, the maker of Otis elevators and Chubb security systems, went public with its offer to buy Diebold Inc for $2.63 billion after failing for two years to persuade the manufacturer of automated teller machines to discuss a combination.
The offer of $40 a share is a 66 percent premium to Diebold's $24.12 price on Feb 29, United Technologies said in a statement. Diebold's board last refused to discuss a buyout on Feb 21, letters provided by United Technologies show.
United Technologies may boost Diebold's performance by selling service contracts to commercial building owners like it does for Otis, said James Geisler, vice-president of finance. Diebold, which is under US investigation for accounting practices, fell 38 percent last year and plans to cut 5 percent of its workforce to slash costs.
"It's a very generous premium," said Gil Luria, an analyst at Wedbush Morgan Securities in Los Angeles, who has a "hold" rating on North Canton, Ohio-based Diebold. "It's likely their offer will be accepted."
Diebold spokeswoman Anna Istnick had no immediate comment on the offer.
The offer values Diebold at 24 times Luria's 2008 earnings estimate of $1.70 a share. Absent the offer, Luria had expected Diebold to trade at about 15 times earnings this year and to reach $25 twelve months from now. Diebold is the biggest US ATM maker by market share, second in the world after NCR Corp, Luria said.
If United Technologies is successful in its bid to buy the company, margins at Diebold would widen as United Technologies uses its productivity program and more efficient sales to markets such as China and India, Geisler said.
"We think this is very friendly to Diebold's shareholders and the most encouraging thing would be for Diebold to sit down with us," Geisler said. "We have many options in front of us, but we are most hopeful we can have a dialogue with them."
If the Diebold board agrees to a discussion and United Technologies can see more detailed information, a higher offer is possible, Hartford, Connecticut-based United Technologies said in its statement.
Agencies
(China Daily 03/04/2008 page16)
