Diebold Inc. has rejected an unsolicited buyout offer from a company that could provide it with deep pockets and a larger international profile, but could also shift its focus away from financial services.
The North Canton, Ohio, automated teller machine company said Monday that its board had unanimously decided to turn down United Technologies Corp.'s proposal to buy all its outstanding shares for $40 each, a premium of 66% over its closing price Friday.
Analysts said United Technologies, a Hartford, Conn., conglomerate, has little experience in banking and might be more interested in Diebold's security business than in its ATM operations.
John N. Lauer, Diebold's chairman, said in a press release that the offer "significantly undervalues" his company, and he urged shareholders not to consider it.
Several observers said that being a United Technologies unit might not be in Diebold's best interest, especially if the buyer were to attempt to cut costs.
Tony Hayes, a director in the retail banking practice at the management consultant Oliver Wyman, a unit of Marsh & McLennan Cos. Inc., said Diebold's ATM servicing operations, an important source of revenue, could be one area where United Technologies might try to reduce expenses.
"The ATM business is looking more and more like the razor blade business," Mr. Hayes said in an interview Monday. "The price of a new ATM is declining every year, and that business has become very competitive. The real value lies is the ongoing servicing."
United Technologies submitted its bid Friday and made the negotiations public Sunday. George David, United Technologies' chairman and chief executive, said in a press release that the deal would pose no operational risk and that Diebold would be a good fit with its other businesses.
"In addition, Diebold will benefit from UTC's international presence and disciplined operating systems," Mr. David said. His company might raise its offer after reviewing Diebold's internal financial reports, he said.
In an exchange of letters that United Technologies released Sunday, Mr. David argued that the ATM vendor's business model, of selling machines and service contracts, is similar to that of his company's Otis Elevator unit and its Carrier Corp. air conditioning and refrigeration business.
Gil B. Luria, an analyst at Wedbush Morgan Securities, did not share that view. "UTC thinks" Diebold "is just another business. UTC thinks it can extract higher margins, like it has with others," he said. But ATMs are "a very specific kind of specialty. It doesn't fit naturally with any other business."
Mr. Luria noted that Diebold's rival, NCR Corp., was a unit of AT&T Corp. for most of the 1990s but spun it off in 1997. The world's third big maker of bank ATMs, Wincor Nixdorf International GmbH of Paderborn, Germany, was spun off by the conglomerate Siemens AG in 1999.
Diebold has been independent since it was founded in 1859.
Patty Hayward, a senior analyst in the debit advisory services practice of Mercator Advisory Group Inc., said that Diebold's core business is more than just manufacturing and service; it also facilitates payments, which would be a new field for United Technologies.
"Why would United Technologies want to be in the payments business?" she said. "If UTC doesn't understand the" payments business, "it could really damage it."
United Technologies may be more keen on Diebold's security operations, which offer cameras and monitoring systems and cater mainly to banks. United Technologies also has a sizable security business, Ms. Hayward said, and if it acquired Diebold, "The ATM side of the business could fade out. It could become more of a security business."
Diebold is restating its financial results back to 2003 after a Securities and Exchange Commission inquiry into its revenue-recognition practices. Ms. Hayward said that has been a factor in the sharp decline in Diebold's stock price from its 52-week high of $54.50 last summer.
Mr. Lauer noted that because Diebold has not been able to release all of its financial records, shareholders do not have a clear picture of its fiscal health, and called the United Technologies offer "opportunistic."
Wall Street appeared to endorse the deal. Diebold's share price closed Monday at $38.84. It closed at $24.12 Friday.