ATM-maker NCR signs off on equity deal with Blackstone
After months of declining comment on one buyout rumor after another, NCR Corp. this morning announced that it has entered into an agreement with investment and advisory firm The Blackstone Group LP — not for a buyout, exactly, but rather for a buy-in.
Under the terms of the agreement, affiliates of Blackstone will invest $820 million in NCR in the form of preferred shares, which, according to an NCR press release, equates to about a 17 percent stake in the company.
In the release, NCR said it expects that the relationship with Blackstone will accelerate the company's transformation into an integrated software and services company.
NCR issued a statement on the deal from company chairman and CEO Bill Nuti:
After concluding a comprehensive review of strategic alternatives, the NCR board has determined that executing our strategic plan with Blackstone's assistance is the best way to accelerate NCRs transformation and build long-term shareholder value Blackstone is an experienced technology investor with a long-term perspective that can help us continue to drive our higher-margin software-related revenue, deliver world-class service globally, optimize our manufacturing processes and supply chain, and rationalize costs.
This investment is a strong vote of confidence in our long-term strategy and future growth potential, and it will enable NCR to return significant cash to those shareholders who want to monetize their investment in the near term while preserving our ability to fund growth opportunities and increase shareholder value in the years ahead.
Upon closing of the transaction, which is expected by early December, NCR will expand its board from nine directors to 11 with the appointment of Blackstone Senior Managing Director Chinh Chu and Managing Director Greg Blank.
"NCR has made tremendous progress removing legacy barriers to growth and executing a corporate transformation focused on extending its product capabilities into new areas of software and services. NCR is well positioned to continue to win market share and deliver exceptional value to its customers," Chu said in a statement.
Blank added, "We are pleased to partner with NCR at such a pivotal time and believe it has the right strategy and vision to meet the needs of a rapidly changing market. Chinh and I look forward to working with the NCR Board and management team to increase value for all shareholders."
Accelerating transformation, supporting growth
According to today's press release, a strategic relationship with Blackstone will provide the resources for NCR to accomplish several goals:
- grow recurring revenue through software development and services initiatives and a continued transition to cloud-based offerings;
- improve services productivity and customer satisfaction through a continuing shift to innovative, higher-margin, value-added service offerings;
- expand margins through lean manufacturing, product lifecycle management and procurement processes;
- optimize hardware and supply chain assets; and
- preserve financial flexibility to drive sustainable growth going forward.
NCR will use the Blackstone investment to help fund the repurchase, through a self-tender, of up to $1 billion of its common stock at an expected price range between $26.00 and $29.50 per share expected. The modified Dutch Auction will commence Friday, Nov. 13. In addition to proceeds from the Blackstone investment, NCR will fund the tender offer with cash on hand and borrowings from its revolving facilities.
Blackstone investment terms
- Blackstone will purchase $820 million of convertible perpetual preferred stock, which is convertible into shares of NCR common stock at a conversion price of $30.00 per share;
- the conversion price represents an 18 percent premium to the 30-day volume-weighted average price ended Nov. 11, 2015;
- the preferred stock carries a 5.5 percent dividend, which will be payable in kind for the first four years following issuance;
- on an as-converted basis, the preferred stock will represent approximately 17 percent of NCRs shares outstanding after giving effect to the Blackstone investment and share repurchase (assuming the tender offer is fully subscribed at the midpoint of the price range); and
- Blackstone may convert the preferred into common at any time and may require NCR to repurchase the preferred after eight-and-a-half years and every three years thereafter. The preferred will be mandatorily convertible into common if the stock price exceeds certain thresholds.
Additional information regarding the investment will be included in a Form 8-K to be filed today by the company with the Securities and Exchange Commission.
"This long-term equity investment is an attractive security that will benefit our company and shareholders alike," said NCR CFO Bob Fishman. "The strategic partnership with Blackstone, which supports our long-term strategy, enables us to repurchase a significant amount of our common stock in the short term, while the terms of the investment preserve our balance sheet flexibility."
NCR held a conference call this morning to discuss the announcement. A replay of the call is available at the company's website.
Suzanne Cluckey / Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally. She is now the editor of ATMmarketplace.com and BlockChainTechNews.com