Diebold Inc. offered 1.57 billion euros ($1.8 billion) in cash and stock to acquire its German rival, Wincor Nixdorf AG, in a bid to create the biggest maker of cash machines and security systems with about $6 billion in sales.
The companies reached a non-binding agreement on Sept. 24 for Diebold to hold a public tender offer for Wincor's outstanding stock at 52.50 euros each, a 35 percent premium to Friday's closing price. Wincor rose as much as 23 percent in Frankfurt trading Monday and advanced 16 percent to 45.21 euros at 1:28 p.m., reflecting investor concerns about the valuation of North Canton, Ohio-based Diebold's stock.
An offer, a combination of cash and Diebold shares, is subject to "material conditions" and depends on both sides completing due diligence, the companies said on Saturday. It would mark Diebold's largest acquisition, topping the purchase of Diebold Procomp for $225 million in 1999, according to data compiled by Bloomberg.
A combination of the companies would create an industry market leader with a share of about 35 percent, ahead of NCR Corp. with an estimated 25 percent, according to Kepler Cheuvreux. Buying Paderborn-based Wincor would give Diebold a bigger presence in Europe, where it now generates less than 15 percent of sales. Wincor gets about 70 percent of its 2.47 billion euros in sales there. Founded in 1859, Diebold has about 16,000 employees.
"This planned transaction makes sense," Harald Schnitzer, an analyst with DZ Bank, said in an e-mailed note to clients. Wincor Nixdorf "has a dominant presence in Europe whereas Diebold's main strengths are in the United States."
Wincor builds hardware and software for banks and retailers, including ATMs and cash registers. The company used to be owned by engineering giant Siemens AG before it was sold to private-equity investors in 1999. It held an initial public offering in 2004 and currently operates in 130 countries with about 9,000 employees. Wincor announced a restructuring program including 1,100 job cuts amid declining sales and profit in April, citing slowing hardware revenue and a deterioration in Russia and China.
There's a high chance the deal will be completed because antitrust issues look "manageable," Kepler Cheuvreux's Stefan August in wrote in an e-mailed note.
The offer values Wincor at about 10 times earnings before interest, taxes, depreciation and amortization. That compares to a median multiple of 13.6 times Ebitda for similar deals, according to data compiled by Bloomberg. Diebold's shares rose 2 percent on Friday in New York, giving the company a market value of $2.2 billion.
Wincor Nixdorf's valuation "looks very stretched for a restructuring case," Commerzbank AG said in note to clients. The combined business would still lack a software footprint, the bank said.
Credit Suisse Group AG is advising Diebold on the deal, FTI Consulting said in an e-mail.
