NCR has struck a deal to buy all of the outstanding shares of non-bank ATM operator Cardtronics, in a deal valued at $2.5 billion, including debt.
NCR (NCR) has agreed to pay Cardtronics stockholders $39 per share. The stock closed 5% lower at $38.81 on Monday. The deal comes after rival bidders, which included an entity affiliated with Apollo Global Management and Catalyst Holdings, didn’t sweeten their $35 per share offer.
Cardtronics (CATM) operates a network of 285,000 ATMs and financial services kiosks across 10 countries. The combined company is expected to generate $100 million-$120 million in run-rate operating cost synergies by the end of 2022.
NCR, which provides ATMs and point-of-sale hardware and software self-service kiosks for retail and hospitality businesses, said that the deal is projected to be accretive to its non-GAAP EPS in the first full year following its closure, which is expected in mid-2021. The company plans to fund the acquisition with cash on hand and fully committed financing provided by Bank of America.
“This transaction accelerates the NCR-as-a-Service strategy, further shifts NCR’s revenue mix to software, services and recurring revenue, and adds value for our customers,” said NCR CEO Michael D. Hayford. “We have had a long-standing relationship with Cardtronics and its outstanding team. Its Allpoint network is highly complementary to NCR’s payments platform, and the combined company will be able to seamlessly connect retail and banking customers.”
The transaction has been approved by the Boards of Directors of both companies. Upon completion of the deal, Cardtronics will become a privately-held company.
Following the deal announcement, Oppenheimer analyst Ian Zaffino lifted NCR’s price target to $40 from $35 and maintained a Buy rating.
“A transaction processor, Cardtronics offers a highly complementary suite of product offerings (payment transactions), as well as a highly accretive financial profile,” Zaffino wrote in a note to investors. “Aside from immediate transaction-driven margin accretion, margins should also benefit from potential synergies on both cost and revenue going forward.” (See NCR stock analysis on TipRanks).
Currently, the rest of the Street is firmly in line with Zaffino’s bullish outlook. The stock scores 6 unanimous Buys, which add up to a Strong Buy analyst consensus. With shares surging a stellar 62% over the past three months, the average price target of $44.60 implies upside potential of another 31% to current levels.
News sentiment around NCR over the last seven days has been very bearish, with 100% of the articles published being bearish, compared to a 37% bearish sector average.