NCR Corporation’s NCR deal to acquire the world's largest non-bank ATM operator — Cardtronics Plc CATM — just got a step ahead as majority of the latter’s shareholders voted in favor of the transaction.
NCR announced on Tuesday that more than 99% of the vote went in favor of the deal during Cardtronics’ shareholders meeting held on May 7. The company expects the transaction to close in the middle of this year.
Notably, in late January, NCR entered into a definitive agreement to acquire Cardtronics for $2.5 billion. The former had submitted an offer to acquire the latter for $39 per share in an all-cash deal. NCR’s proposal was higher than the earlier bid made jointly by Apollo Global Management APO and Hudson Executive Capital.
On Dec 15, 2020, Cardtronics entered into a definitive agreement to be acquired by funds managed by affiliates of Apollo Global Management and Hudson Executive Capital, for $35 per share in cash. The firms had earlier proposed to acquire it for $31 per share.
Later, on Jan 7, Cardtronics noted that it had received an unsolicited proposal from a third-party to acquire it for $39 per share in cash, subject to a non-disclosure agreement.
Why Does Cardtronics Buyout Make Sense for NCR?
Cardtronics processes value-added payment transactions and provides ATM solutions to financial service providers in order to drive in-store traffic and retail transactions. It also enables cash transactions at more than 285,000 ATMs across 10 countries. In addition, the firm provides a retail-based surcharge-free ATM network through its Allpoint Network across more than 55,000 locations.
Notably, the proposed acquisition is anticipated to fortify the NCR-as-a-service strategy. Cardtronics’ robust debit network will further expand NCR’s payments platform, and help it connect to retail and bank customers, thereby facilitating customer acquisition.
Moreover, the integration will give the company access to Cardtronics’ installed base of ATM network across multiple regions. This will support the company to enhance its scale of business and boost cash flows. It will also help the company capitalize on the ongoing transition of the banking industry toward outsourcing of ATM operations and branch rationalization.
Apart from these, the buyout bodes well for NCR’s steady focus to enhance its software and services revenue mix, and drive margin expansion by boosting the company’s recurring revenues.
NCR believes the acquisition of Cardtronics would be accretive to its adjusted EPS in the first full year following the transaction’s conclusion. Additionally, it expects to achieve $100-$120 million in operating cost synergies by the end of 2022.
Solid Momentum in Banking Business to Aid Top Line
NCR’s shares have gained 197.5% over the past year, as against the Zacks Computer - Integrated Systems industry’s decline of 28.7%.
The company significantly benefits from the ongoing digital transformation across the banking industry, which has only picked up pace now thanks to the pandemic. This has bolstered demand for its digital banking solutions across banks and financial institutions.
Last month, 121 Financial Credit Union selected NCR digital banking platform to deliver elevated digital experience to its retail and business banking customers. In March, OnPath Federal Credit Union selected NCR’s digital banking platform to provide a consistent and intuitive digital banking experience.
NCR has made a few acquisitions to fortify its Banking business. Following the Cardtronics acquisition proposal in January, the company acquired customer account opening and onboarding solutions provider, Terafina, in February to expand its Digital First Banking platform.
Further, NCR has 24 million digital users on its digital banking platform, reflecting 24% year-over-year growth. Its services are implemented by 650 banks and credit unions.
Currently, NCR carries a Zacks Rank #3 (Hold).
A better-ranked stock in the broader technology sector is Lam Research Corporation LRCX which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Lam Research is currently pegged at 32.8%.
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