Hudson Executive Capital And Apollo Global Management Bid to Take Cardtronics Private

Cardtronics plc, a leading non-bank ATM deployer, has been tendered an offer by Hudson Executive Capital and Apollo Global Management for its outstanding shares of stock at $31 per share in cash. 

Cardtronics, which operates more than 270,000 ATMs, has a less than 10% share of the global ATM business and about a 1% share of ATM withdrawals, making it a unique asset with an opportunity to capture market share, Robert Napoli, an analyst at Chicago-based William Blair & Co. LLC, says in a research note.

The offer represents a 20% premium to the closing share price, suggesting a “$2 billion enterprise value at about 7 times our 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) estimate,” says Napoli. Hudson Executive has owned about 19% of Cardtronics since late 2017 and sits on the company’s board of directors.

Hudson Capital and Apollo are likely betting Cardtronics will emerge stronger in the post-Covid 19 pandemic world, says Sam Ditzion, chief executive of Tremont Capital, a Boston-based advisory firm. Indeed, the company has shown an ability to bounce back from the economic havoc caused by the pandemic, stating in June that total cash dispensed through its ATMs in the United States jumped that month nearly 10% year-over-year on a same-unit basis, following 3% growth in May from May 2019.

“Following the Covid-related effects, management was targeting 3%-5% organic revenue growth and 7%-9% adjusted EBITDA growth through 2023; these targets appear reasonable as it has averaged constant-currency ATM revenue growth of about 6% since 2008,” Napoli says.

Cardtronics has multiple ways it can respond to the offer, according to Ditzion. One option is to shop the company to other potential bidders. Another is to negotiate the bid price, and a third is to refuse the offer, which could lead to a proxy fight. 

“It’s important that Cardtronics evaluate this offer and evaluate it thoroughly, then look at what its alternatives are,” Ditzion says. “They are a large company with impressive assets.”   

Napoli believes there is potential for other bidders to emerge since the Hudson/Apollo offer is not overly aggressive. “Recall that Seven Bank entered the U.S. ATM market several years ago, but to date appears largely focused on ATMs in 7-Eleven units. Euronet has developed a very strong ATM business outside the United States and could have interest. Euronet made a very small acquisition of Texas-based Dolphin Debit early this year, giving it a U.S presence. At its recent investor day, NCR highlighted its ATM-as-a-service initiative, and Fiserv has a large ATM business following its acquisition of First Data and the ATM Managed Services and MoneyPass assets from Elan Financial in 2018,” Napoli says in his note.

Ditzion agrees the potential for other suitors exists. “There may be companies interested for strategic or financial reasons,” says Ditzion. “And one way for Cardtronics to negotiate the bid is to shop the company,” says Ditzion. Part of what makes Cardtronics an attractive takeover target, according to Napoli, is that it has adjusted its business strategy to focus less on mergers and acquisitions and more on growing transactions. The company also generates strong free cash flow, recording $127 million in the first nine months of 2020, Napoli says.