ATM Operator Cardtronics Will Go Private in a $2.3 Billion Deal With Hudson And Apollo

Less than a week after receiving a buyout offer, Houston-based ATM network operator Cardtronics Inc. has entered into a definitive agreement to be acquired by Hudson Executive Capital and Apollo Global Management for $35 per share. The purchase price is $4 per share more than the initial offer and represents a 35% premium to Cardtronics closing share price on December 8, 2020, the day before the offer was originally tendered. The transaction price indicates an enterprise value of $2.3 billion, including net debt. The deal is expected to close in the first half of 2021.

Hudson Executive has owned about 19% of Cardtronics since late 2017 and sits on the company’s board of directors.

“The purchase price is a significant premium,” Sam Ditzion, chief executive of Tremont Capital Group, a Boston-based advisory firm specializing in the ATM and payments industries says by email. 

In the days following the initial offer, Cardtronics engaged in a comprehensive review of the offer and alternatives, which included talks with strategic buyers and financial sponsors. “Our board of directors regularly evaluates all opportunities that have the potential to maximize value for shareholders,” Cardtronics chief executive Ed West said in a prepared statement. “As a private company, supported by Apollo and Hudson Executive, we will have increased flexibility and resources to further invest in our business to accelerate growth and innovation.”

The speed with which the offer was accepted, however, suggests the Cardtronics board felt it was the best deal the company could find, according to Ditzion. “I am a bit surprised that a deal was quickly accepted versus being shopped over the next few weeks through a formal process, so this signals that the board and bankers felt that this $35-per-share offer would be the best option available,” he says. “On the other side, Hudson Capital and Apollo by definition are clearly confident that they are getting a good or fair deal at $35 per share and will be able to extract incremental value from growth post-Covid.”

Part of what makes Cardtronics an attractive acquisition target is that the company has revamped its business model since West joined the company as chief operating and chief financial officer in 2016 and Gary Ferrera came in as chief financial officer in late 2017, Robert Napoli, an analyst at Chicago-based William Blair & Co. LLC, says in an equity research note. 

“Management reduced its focus on M&A activity, changed its go-to-market strategy, and is focused on growing transactions on its existing platform. Further, the company generates strong free cash flow ($127 million in the first nine months of 2020),” Napoli writes in his research note.

In addition, Cardtronics has bolstered its partnerships with banks for branding and grown its Allpoint surcharge-free network through partnerships with bank and financial-technology companies. “We view Allpoint as a very attractive asset,” Napoli says.

Cardtronics has a network of more than 270,000 ATMs and about a 10% share of the global ATM market and about a 1% share of ATM withdrawals, giving it a unique opportunity to capture more market share, Napoli adds.