United Technologies Corp, the maker of Otis elevators and Chubb security systems, said it offered to buy Diebold Inc. for $2.63 billion, taking its bid public after the automated-teller machine maker's board declined to discuss a combination for two years. ( Bloomberg )
United Technologies is offering $40 a share, a 66 percent premium to Diebold's $24.12 price on Feb. 29, the company said in a statement. The Diebold board last refused to discuss a buyout on Feb. 21, letters from United Technologies show.
United Technologies may boost Diebold's performance by targeting commercial building customers by installing equipment and selling service contracts like it does for Otis, said James Geisler, vice president of finance at the company. Margins would widen using United Technologies' productivity program and more efficient sales to markets such as China and India, he said.
``We think this is very friendly to Diebold's shareholders and the most encouraging thing would be for Diebold to sit down with us,'' Geisler said. ``We have many options in front of us, but we are most hopeful we can have a dialogue with them.''
If the Diebold board agrees to a discussion and United Technologies can see more detailed information, a higher offer is possible, Hartford, Connecticut-based United Technologies said in its statement.
Diebold spokeswoman Anna Istnick had no immediate comment.
Diebold, under U.S. investigation for accounting practices, fell 38 percent last year. Last month, the North Canton, Ohio- based company said it plans to cut about 5 percent of its workforce to reduce costs.
In January, Diebold said it would restate four years of results to change how it recognizes revenue following discussions with the SEC.
On Feb. 6, Diebold said in a statement it revised its 2006 revenue estimate to $2.93 billion. Sales in 2007 are now estimated at $2.95 billion, an increase of 1 percent, lower than the company's April projection of a 3 percent to 5 percent growth, the company said, announcing the completion of a review.
Diebold is ``still a good business and the offer is subject to due diligence,'' said Geisler.
About 20 percent of United Technologies' revenue comes from emerging markets, giving units like Otis, Carrier and UTC Fire and Security confidence in future growth because of increasing urbanization, the company said last week. Carrier and Otis are the world's biggest companies in their industries.
United Technologies gets more than 60 percent of its revenue from overseas, Geisler said, whereas Diebold gets less than half. A Diebold purchase would be the biggest for United Technologies since the 2005 acquisition of Kidde Plc for about $3 billion. United Technologies typically makes about $1.5 billion to $2 billion in acquisitions annually.
Margins at Diebold, now in the ``single-digits,'' could be raised to ``double-digits,'' over time under United Technologies ownership, Geisler said. About a quarter of equipment made by Diebold, which also makes voting machines, fits with United Technologies' security unit, he said.
United Technologies is getting advice from Morgan Stanley and Wachtell Lipton Rosen & Katz. Its shares fell $1.66 to $70.51 on Feb. 29. The stock, up 22 percent last year, is down 7.9 percent year to date.