NCR Corp. entered into a definitive agreement Monday to acquire ATM network operator Cardtronics plc for $39 a share in an all-cash transaction valued at $2.5 billion, including debt. The deal, which NCR plans to finance with cash on hand and financing from Bank of America N.A., is projected to close mid-year.
The deal is expected to accelerate NCR’s transition away from being primarily an ATM manufacturer to full-service provider of services embracing hardware, software, ATM driving and operating, switching, and routing, all of which can be sold on a subscription basis.
In addition to operating its Allpoint ATM network, which has more than 55,000 locations, Cardtronics provides transaction-processing services to financial institutions and retailers.
NCR also sees opportunities to push deeper into the payments space by cross-selling its services to Cardtronics customers and Cardtronics’ services to its customers. Opportunities will also likely emerge to expand relationships with overlapping customers between the two companies.
One opportunity, for example, would be to sell access to Cardtronics’ Allpoint network to financial institutions and retailers that are not part of the network. NCR considers Allpoint an attractive asset for boosting subscription and recurring revenues. Opportunities may also emerge for NCR to expand its merchant-acquiring capabilities by developing new payment solutions. Two potential merchant segments are convenience stores and restaurants.
“This deal is consistent with NCR’s strategy to drive the business into software and services that create recurring revenue,” NCR president and chief executive Michael Hayford said in conference call. “We don’t just want to sell hardware and components, but the full stack.”
NCR officially emerged as a bidder for Cardtronics a couple of weeks ago. Before that, rumors were swirling that an unidentified company had offered a bid of $39 per share for Cardtronics, besting a previous offer from Hudson Executive Capital and Apollo Global Management to for $35 per share.
The deal, which Hayford describes more as a merger than an acquisition, is expected to create between $100 million and $120 million annually in estimated cost savings. NCR expects to begin realizing those savings in the next 18 to 20 months, according to Tim Oliver, chief financial officer for NCR.
Cardtronics was not an unknown quantity to NCR, as the two companies have done business for years. As a result, Hayford acknowledges, NCR had looked into acquiring Cardtronics in the past as a way to help grow NCR’s business.
“Cardtronics offers NCR a lot of strategic value through its relationships with banks and retailers, its transaction processing, and the Allpoint network,” says Sam Ditzion, chief executive of Tremont Capital Group, a Boston-based advisory firm specializing in the ATM and payments industries. “This is not a random acquisition.”
Nevertheless, Ditzion says questions facing NCR include whether it can fully integrate Cardtronics into its service strategy, how quickly NCR can complete that integration, and whether NCR can achieve the projected costs savings.
“It’s going to take a couple of years to figure that all out,” Ditzion says.