Stock of the Day
|
Diebold (DBD)
Diebold Object of United Tech's Affection
United Technologies (UTX: Charts, News, Offers) is exemplifying the old adage that "if at first you don't succeed, try try again." After a previously attempted takeover was rebuffed, the Connecticut-based conglomerate is making another go at acquiring Diebold, and this time they are raising the stakes. Diebold, who has been facing declining revenues and enacting broad-based cost-cutting initiatives, would have much to gain if taken under the wing of a company like United Technologies. What are the company's objections to being acquired and will this apprehension close the door on any potential for its sale?
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
| Stock Analysis |
Incorporated in 1876 as Diebold Safe & Lock Co., a safe and vault manufacturer, Diebold has expanded its business over the years to include the development, manufacturing, and sales of automated teller machines (ATMs), voting machines, and security systems. Based in North Canton, Ohio, the company has built an international presence with an especially strong foothold in China's ATM market and has factories around the globe. Diebold has hit some rocky conditions lately, though, on the heels of a steep drop in revenue in the election systems division, which fell 69 percent to $61 million, and delays in Brazil where they were installing a lottery system, resulting in an 87 percent decline in revenue.
|
Buy Diebold for just $4
|
Diebold is refusing to sit idly by as these issues plague its bottom line and last month announced a plan to cut costs and improve operations. The plan calls for trimming the work force by 5 percent, or 800 jobs, mainly in North America and Brazil. The company will also be evaluating its manufacturing and storage facilities in both North and South America for additional ways to reduce spending. Last year, Diebold unveiled a plan to save $100 million, but an estimated revenue increase of only about 1 percent in 2007 to $2.95 billion from an adjusted $2.93 billion in 2006, is forcing the company back to the drawing board to find more areas of improvement. In the wake of these struggles, why isn't Diebold more interested in United Tech's offer?
|
United Tech has made a name for itself as a conglomerate whose businesses include Otis elevators, Carrier heating and air-conditioning systems, Pratt and Whitney airp*** engines, and most recently, security systems and software developer Lenel Systems International; Chubb, a fire safety and security services business; and Kidde, a fire and safety company from Britain. The company's unsolicited bid for Diebold is valued at $2.63 billion or $40 a share in cash, a 66 percent premium to Friday's closing stock price of $24.12. United Tech further stated that if a due-diligence financial review could be conducted, it might be prepared to increase the price of $40 per share. United Tech's decision to make the offer public yesterday came after the deal's rejection by Diebold on February 21 and follows two years of negotiation attempts. Diebold CEO John Lauer's reasoning for the declined offer was that the board had decided that, "it was not in the best interests of the corporation or its shareholders to pursue discussions with UTC regarding a business combination with Diebold." United of course feels otherwise, emphasizing the potential gains for Diebold. United Tech CEO George David said, "This transaction creates significant and immediate value for Diebold shareholders with no operational risk, while creating long term value for UTC shareholders."
|
Aside from its cost-cutting initiatives to get the revenues back on track, Diebold is also preoccupied with a review of its accounting practices, which are under investigation by the Justice Department. Diebold has not released any financial statements since April and expects the review to continue through the end of the first quarter or into the second quarter, at which point it will release the remaining three quarter's worth of financial statements for 2007. An accounting practice that has already been changed as a result has increased revenue by $31 million in 2007 and by $27 million in 2006. For previous years, $190 million was removed from the top line. Perhaps the company's internal concerns are weighing too heavily for a consideration of United Tech's offer but one thing is for certain. The acquisition drama has struck a chord with investors, who gave Diebold a 15-point boost in early trading today. It remains to be seen whether the takeover bid is officially off the table or if talks continue.
|
Special Offer
|
| Buy DBD for just $4
|
Profile |
Click here to view a detailed profile of Diebold.
|
|
|
|
|
Back to newsletter list
