Diebold comes out swinging

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03/10/2008
Sorry I didn't post this earlier, but you can find a copy of Diebold's March 5 letter to UTC here. In no uncertain terms, Diebold Non-executive Chairman of the Board John N. Lauer makes it clear that Diebold isn't interested in being acquired. Here are some choice paragraphs: UTX is opportunistically seeking value that belongs to Diebold shareholders Your $40.00 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, a U.S. ATM and financial self-service environment that is anticipated to improve in 2009 from recent lows, important opportunities for growth overseas and cost initiatives that are on track to eliminate an initial $100 million from our cost structure by the end of 2008. I agree that UTC is being opportunistic, but can you blame them? Hey Diebold board, if you don't want to be acquired, get your stock price up. It's in free-fall last time I checked, and it's going to get worse if you rebuff this offer. No basis for Diebold shareholders to accurately determine appropriate value As we have clearly stated, given that we are in the process of working to become current in our financial results, there is simply insufficient financial information for investors to assess valuation. Accordingly, we have been unable to provide forward-looking guidance to date. As we have previously reported, the Company is working diligently to complete this process as quickly as possible. Hence, it would be imprudent for us to engage in any change-of-control discussions at this time. We believe that no responsible, objective management team or Board would assert otherwise and have heard from a number of our shareholders in the last few days that share this view. Seriously? Diebold's financial numbers are way late. Not just a little late. If I'm a shareholder, I'm thinking: "Throw us a bone with some good-looking numbers if you want us to believe we shouldn't take what we can get at this point." Misleading characterizations by UTX We take exception to your assertion that UTX has "sought for more than two years to engage Diebold in constructive discussions." This statement is inaccurate and misleading. Prior to your letter dated February 29, 2008, UTX had never made a firm proposal to acquire Diebold. In fact, UTX approached Diebold on only two occasions with non-specific inquiries -- first a brief, informal conversation that took place roughly two years ago between an investment banker (who did not identify his client) and a Diebold Board member; and second, your letter dated February 19, 2008, which referenced a vague proposal without any specific price. Two points of contact separated by two years does not, in our opinion, represent "constructive discussions to increase shareholder value" as you have publicly stated. This is tasty. Particularly for me. I've noted in past posts how certain financial journalists are acting like they knew all along about this supposed two-year courtship. Hogwash. They're just going on UTC's verbiage, which smelled a little funny to me from the outset. If this courtship has been going on so long, how come UTC released nothing older than that Feb. 19 letter? Point for Diebold here. UTC's definitely trying to spin public favor, and the financial analysts, wanting desperately to look insider are buying it. Simply put, UTX's 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 Board that discussions now will not likely result in the best outcome for our shareholders. This is good work on Diebold's part. Even though they come off more than a bit whiny, they've put put all the onus back on UTC. It's passive-aggressive, considering the "time when we cannot responsibly engage in discussions" is pretty much their own fault, but I think it works, and they engage in a little spin of their own: "Simply put, blah, blah." Actually, it's not all that simple. People I've spoken to think the offer is about at one times trailing revenues, which is pretty much what firms in the security space are going for right now. Sure, UTC should be willing to pay a bit more of a premium for Diebold's size, but Diebold is in a tailspin right now, by most accounts, is laying people off, and can't get its numbers out. I'm thinking that damages your value a bit.