All was quiet a day after United Technologies Corp.
launched its $3 billion hostile bid for Diebold Inc., as investors braced for what could be a long, drawn-out battle for control of the troubled automated teller machine maker.
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Shares of Diebold -- which traded up 60% on Monday -- gave back more than 2% on Tuesday, opening a spread of more than $2 from the $40 per share cash takeout price and showing that investors do not expect an immediate higher bid from either UTC or another suitor. Diebold, which has not filed quarterly results in nearly a year as it works through accounting issues, told shareholders they will see when it does release results that the price greatly undervalues the company.
UTC for its part appears content to wait. Oppenheimer analyst Myles Walton in a research note said that while Diebold "is by no means a must-have for UTX," he anticipates "a spirited pursuit" and expects the aggressor to appeal to Diebold shareholders to lobby on its behalf.
Although some analysts worry that United Technologies' already is paying a rich premium, there appears to be room for a sweetener. UTC in its announcement said it has been pursuing Diebold for two years. A quick glance at the target's stock price history shows that its shares spent much of that time above the $40 offer price before slumping this fall.
But skeptics note that Diebold's accounting troubles are not the only reason its stock was in the low $20s prior to UTC's public offer. The company generates about 60% of its revenue selling ATMs and other products to financial institutions. With banks presumably cutting expenses as they weather the subprime mess, Diebold might face slowing sales in the quarters to come. And with that in mind, United Technologies might not be willing to pay now what it would have 18 months ago. - Lou Whiteman
See United Technologies' offer
See Diebold's response
See story about UTC's offer from TheDeal.com
See related story about the deal's dangers to UTC from Corporate Dealmaker
See Diebold's two year stock chart from Yahoo! Finance
