An interesting UTC-Diebold development

 - 
03/27/2008
Looks like UTC has had a card up its sleeve all along: It already owns 3.5 percent of Diebold's outstanding shares. Kapow! Actually, I'm not sure what that means. UTC believes it's the sixth largest shareholder of the company, which should give them a little juice, but it's not exactly sitting in the catbird seat. Should they team up with a couple of the top five shareholders, then maybe they're all in business to come up with a slate of board members and start really shaking things up. (My apologies for not being able to figure out who those top five are - it's possible they're all board members, actually. I looked through their SEC filings, but all I could find was a total of 60,000 or so shareholders.) That assumes, of course, that the top fives are looking to sell for $40 a whack and agree with UTC that they aren't going to get a better offer. If they believe the Diebold board, then they'd think UTC were trying to buy low (despite a 66 percent premium) and be insulted by UTC's offer in the way the board is. Diebold's board is certainly unimpressed by UTC's unveiling. Here's the important part, I'd say: The company currently anticipates its financial review will be completed by the end of the second quarter of 2008 and it will make all appropriate filings as soon as possible thereafter. Those numbers are going to tell a big story to Diebold's real value, and whether the $40 offer is fair or a lowball. In the last annual report the company filed, at the end of 2006, Diebold reported sales of just under $3 billion. So, if UTC's offer is right at $3 billion, we're talking about a sales price of one times annual sales (or a little less). That might be the going rate for a smaller integrator, but I'm thinking UTC should expect to pay a premium for Diebold's size and name recognition (though some of that name recognition is negative in some respects). Probably 1.5 times sales is more like going rate. That's kind of a $1.5 billion difference...