NCR Corporation NCR, an ATM and POS manufacturer, recently revealed that it has concluded the ongoing perpetual convertible shares (redemption of these shares releases fund that can be used in other profitable ventures and business) transaction with The Blackstone Group L.P. BX. The deal was announced on Nov 12 this year. The tender offer (subject to certain conditions) is scheduled to expire at midnight on Dec11, 2015.
According to the deal, Blackstone, one of the world's leading investment and advisory firms will acquire a minority stake in NCR for $820 million with the right to appoint two members to NCR’s board. Following the transaction, NCR expanded its board of directors from 9 to 11.
NCR will utilize some of the proceeds from the Blackstone investment to fund its previously announced share buyback program of a billion dollars. We also believe that the proceeds from the sale will be utilized to pay back part of its huge debt and enhance liquidity.
Cravath, Swaine & Moore LLP acted as the legal advisor for NCR while J.P. Morgan was its Strategic Advisors. Kirkland & Ellis LLP functioned as the legal advisor of Blackstone while Citi, Goldman, Sachs & Co. and RBC Capital Markets acted as financial advisors to Blackstone.
It is worth mentioning that this was Blackstone’s third attempt to acquire NCR shares. The first attempt was made in June this year. Blackstone had teamed up with Carlyle Group LP CG and made a joint offer of $10 billion for NCR in a leveraged buyout (LBO). Again, the company attempted to strike a deal in September.
However, the parties were unable to agree on a price. NCR’s bankers demanded $36 a share, which, according to the two private equity firms, was too high since the company was highly leveraged and generated minimal cash flows. The company had a long-term debt of $3.24 billion at the end of the third quarter of 2015 and generated free cash flow of only $106 million in the quarter.
Founded in 1884, NCR invented the cash register, and manufactures ATM machines and checkout equipment. However, over the past few years, NCR’s management has been criticized by shareholders for the company’s performance and late entry into the cloud space.
NCR’s third-quarter 2015 revenues declined 2.1% year over year.
To Conclude
NCR’s growing strength in the ATM and self-service kiosk spaces is encouraging, given the tremendous growth prospects in the respective markets. The company’s continued product launches will enable cloud providers to gain access to NCR’s IT infrastructure and service support in a highly flexible and cost-effective way. Also, growing popularity of its self-service offerings, new deal wins and synergies from acquisitions are catalysts.
However, softness in the ATM business in mature markets and competition from Diebold Incorporated DBD and HP Inc. remain concerns.
Currently, NCR carries a Zacks Rank #3 (Hold).
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