Letter From Diebold Says Buyout Offer “Inadequate”

Mar 11, 2008 4:43 PM

           

Diebold Inc. released a letter from its chairman to United Technologies that calls the Connecticut company's $40-a-share buyout offer ''opportunistic'' and ''inadequate.''

According to the Akron Beacon Journal, the letter sent out last week also said that United Technologies Corp. has mischaracterized the history of discussions between the two companies and that the company previously had never made a firm offer for Diebold.

United Technologies, meanwhile, responded by issuing a release saying it remained interested in buying Diebold for $40 a share and is ready to begin discussions now.

Also, an industry analyst in a note to investors said United Technologies might raise its offer by $2 a share over the next 60 days, based on its acquisition record. But Diebold needs additional bidders to get the company to increase the offer, wrote Gil Luria at Los Angeles-based Wedbush Morgan Securities, according to Bloomberg News.

United Technologies recently revealed that it was offering $2.6 billion for Diebold, the supplier of automated teller machines, electronic voting machines and security systems. The disclosure sent Diebold stock soaring up 61 percent on Monday from Friday's closing price of $24.12. United Technologies took in $54.8 billion in 2007 making Pratt & Whitney jet engines, Sikorsky helicopters, Carrier air conditioners, Otis elevators and more; Diebold's revenue in 2006 was $2.9 billion.

Diebold quickly responded Monday that it had rejected United Technologies' offer. Wednesday's letter clarified Diebold's position.

''Your $40 per share offer is 27 percent below Diebold's 52-week high of $54.50 reached only seven months ago. Moreover, your offer is an opportunistic attempt to acquire Diebold at an inadequate price that does not reflect significant progress against our current strategic initiatives,'' Diebold Chairman John N. Lauer wrote. ''Simply put, (United Technologies') proposed offer is far below what Diebold is worth. Furthermore, your overture, which comes at a time when we cannot responsibly engage in discussions, and the hostile nature of your approach, has convinced the (Diebold) board that discussions now will not likely result in the best outcome for our shareholders.''

The letter said that because Diebold is in the process of revamping its financial statements (as part of an SEC investigation into former accounting practices), shareholders have no basis on which to evaluate the United Technologies bid.

But United Technologies said Diebold's financial and stock performance and ''the inability of Diebold's leadership to file timely financial statements'' are not valid reasons to avoid discussions.

''(United Technologies) remains ready to discuss its proposal with the Diebold board of directors,'' the company said in a statement. United Technologies said it is ready to begin the due diligence process immediately.

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