Diebold Inc. has entered a bid to buy Henry Bros. Electronics Inc. to bolster its security business, according to a press release from a competitor.
Kratos Defense and Security Solutions Inc. said the North Canton, Ohio, terminal maker recently offered $8 a share for Henry Bros — outbidding Kratos' $7 a share offer. Kratos has since raised its offer to $8.20 per share in a deal worth $52 million. Henry Bros., a Fair Lawn, N.J., security company, said in a Nov. 15 securities filing that its merger deal with Kratos was amended on Nov. 13.
Eric DeMarco, Kratos' president and chief executive, described Diebold's move as "just incredible … It was our deal. It was out there."
Kratos is a San Diego company that specializes in security for the federal government.
For Diebold, a winning bid would strengthen its security business at a time when it is making plans to expand its protection offerings, according to analysts.
In a third-quarter earnings call, Diebold's chief executive, Thomas Swirdarski, said his company had been awarded a contract to provide security for World Trade Center Tower 4 in New York and the entire transportation hub beneath the World Trade Center site. These projects would bring in about $30 million of revenue, he said then.
Diebold's bid threw a wrench into the works of a planned Kratos-Henry Bros. merger, DeMarco said. Kratos had been talking since the beginning of the year to Henry Bros., which provides security for "virtually every airport in the New York-New Jersey area."
The Ohio company made its bid to Henry Bros. at a time when the latter was shopping itself around to Kratos' competitors, said Gil Luria, an analyst at Wedbush Securities. The process, called a "go-shop" period, helps a company establish its worth on the market.
"They do a lot of things that Diebold would want to do," said Luria. "I mean, [the World Trade Center] is a really big project, Diebold needs a lot of resources to deliver that project, and this gives it the most relevant resources."
He said Henry Bros. has "specific expertise" in emergency response and "has a lot of relationships in New York City that makes them specifically valuable for Diebold to deliver on this kind of project."
DeMarco said that during the "go-shop" period Henry Bros. was required to let Kratos know if it was approached by any other company. "That's how we found out," he said. DeMarco said that his company plans on keeping Henry Bros. intact but that he has heard Diebold would not.
DeMarco said Diebold would eliminate the Henry Bros. name, as well as its management team and many employees. A Diebold spokesman would not comment on this allegation, nor on any aspect of a potential bid for Henry Bros.
The spokesman did not dismiss the idea that Diebold would pursue a purchase in this field.
"We have previously communicated that the company's M&A strategy would focus on smaller, bolt-on acquisitions … and growing our enterprise security business," Michael Jacobsen of Diebold said in an e-mail.
A spokesman for Henry Bros did not respond to a request for comment. A stockholder meeting to vote on the merger plans with Kratos will be held Dec. 9.
