ATM mega deal: American ATM maker Diebold offers to buy German ATM player Wincor

By @diplomatist10 on
Ex Oriente Lux CEO Thomas Geissler holds a gold bar after unveiling the first gold-plated ATM (automated teller machine) in Europe, at a Madrid's luxury hotel September 23, 2010. The machine, which features cutting-edge technology, dispenses 1g, 5g a
Ex Oriente Lux CEO Thomas Geissler holds a gold bar after unveiling the first gold-plated ATM (automated teller machine) in Europe, at a Madrid's luxury hotel September 23, 2010. The machine, which features cutting-edge technology, dispenses 1g, 5g and 10g gold bars and also dispenses gold coins bearing designs such as Krugerrand, Maple Leaf and Kangaroo, which are sold in gift boxes at real-time prices, organizers said in the media release. Reuters/Sergio Perez

The ATM machine market in the United States could be heading for a consolidation. This follows the reported proposal of acquisition by U.S. automated teller machine maker Diebold to German ATM maker Wincor Nixdorf.

According to statement by Wincor, the companies have entered into a non-binding agreement on a cash-and-share deal after valuing Wincor at 52.50 euros per share (AU$71.99).

The deal is expected to help the companies sharpen their focus on the growing digital-payments segment and move away from the declining ATM business. By joining hands, the duo hopes to boost investment in the development of software and IT services, reports The Wall Street Journal.

Diebold, in a communication confirmed that it has entered into a non-binding term sheet agreement with Wincor Nixdorf regarding a potential strategic business combination.  

However, Mike Jacobsen, Senior Director, Corporate Communications, said the proposal is still in discussion stage and there is no guarantee that a binding agreement will be reached or a public tender will be issued. Diebold said it will not offer any comment until a binding agreement is reached or else the discussions are discontinued. The company noted that entering such a transaction is still subject to the satisfactory completion of due diligence by both parties.

If the deal gets through, it will give Diebold a foothold to expand into Europe, way beyond its traditional market in North America. Diebold is headed by former Hewlett-Packard Co. executive Andy W. Mattes. It is in the midst of a cost-cutting drive and is planning to slash annual costs by AU$276.75 million, while investing AU$138 million into electronic security, software and IT services through 2017.

Wincor is also grappling with falling revenue and said in April that it will prune its ATM-making capacity and try to strengthen software and IT services activities, which accounts for 59 percent of its sales.

Digitisation opportunity

“The trend towards digitisation embraced by both banks and retailers has added to the momentum of change, with software and high-end service solutions playing a prominent role and opening up opportunities for growth at Wincor Nixdorf,” Wincor Chief Executive Eckard Heidloff said.

Analysts had expressed concerns about the future of cash usage and the bleak outlook on the ATM industry because of surging mobile payments.

“The market seems to be afraid of structural challenges from cashless payments,” commented UBS analyst Sven Weier.

Nevertheless, Diebold said recently that it is bullish on cash usage which will be growing 3 percent a year through 2020. Wincor's boss also said he sees an opportunity ahead.

“Pent-up demand in Western European banking, as the installed ATM base is over 10 years old, is coinciding with the need to spend on branch transformation,” Heidolf said.

Gain for Wincor

Wincor Nixdorf AG shares jumped in the aftermath of the Diebold Inc. offer, rising 23 percent in Frankfurt trading to touch 45.47 euros on Monday. The deal will be a game changer as it will create the biggest single player in cash machines and security systems.

If the deal happens, Diebold will be a winner as it will be its largest ever acquisition, much bigger than its 1999 purchase of Brazilian ATM maker Procomp for AU$311 million, reported Bloomberg.

The combined might of the two companies may create an industry market leader in Diebold and can command a market share of 35 percent, exceeding the reigning market leader NCR Corp’s 25 percent, noted an analyst from Kepler Cheuvreux.

The Bloomberg report also said the proposal has given Wincor a valuation at 10 times above its earnings before interest, taxes, depreciation and amortisation.

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