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It's official: Diebold Inc., Wincor Nixdorf to become Diebold Nixdorf

The ATM manufacturers have revealed the terms of their combined business agreement — and the new identity the company will take on when the deal is finalized.

November 23, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

Sometime in the mid-1800s, Carl (aka Charles) Diebold, occupation locksmith, left his native Germany to find new opportunity in the U.S. Now the company he founded — Diebold Inc. — has come full circle in a way, finding new opportunity in Germany — and beyond — with the acquisition of Wincor Nixdorf AG.

The former ATM industry rivals announced at 11 p.m. EST yesterday that they have entered into a business combination agreement following the approval of terms by the boards of both companies. Terms of the deal call for Diebold to launch a voluntary public tender offer to all shareholders of Wincor Nixdorf.

According to a Diebold press release, the company will offer Wincor Nixdorf shareholders 38.98 euros ($41.38) in cash plus 0.434 Diebold common shares per Wincor Nixdorf share. This transaction values Wincor Nixdorf, including net debt, at approximately 1.7 billion euros ($1.8 billion).

Following completion of the offer and subject to certain approvals, the combined company will be named Diebold Nixdorf, with common shares publicly listed on the New York Stock and the Frankfurt Stock exchanges, the release said. The combined company will maintain registered offices in North Canton, Ohio, and will operate from headquarters in North Canton and Paderborn, Germany.

According to the release:

The combined company will build upon the two companies' shared vision that services and software drive the consumer experience and enable customers to differentiate themselves in an evolving industry. The combined company will pursue a growing total addressable market of approximately $60 billion, according to independent market estimates and Diebold internal analysis.

'Scale, strength and flexibility'

Diebold President and CEO Andy W. Mattes and Wincor Nixdorf CEO Eckard Heidloff (both men are German, incidentally) released statements about the acquisition and its expected results.

Mattes addressed the business synergies presented by the combination:

The rate of change we see in our industry is unprecedented, and by leveraging innovative solutions and talent from both organizations we will have the scale, strength and flexibility to help our customers through their own business transformation. Our new company will be well positioned for growth in high-value services and software — particularly in the areas of managed services, branch automation, mobile and omnichannel solutions — across a broader customer base. This combination was made possible through the successes we have had and continue to create in the Diebold 2.0 transformation plan.

We have a history of collaboration with Wincor Nixdorf, and our shared approach will help drive a successful integration and minimize disruption. I am very excited about the many opportunities we will create together.

Heidloff emphasized the companies' complementary geographies:

The combination of Diebold and Wincor Nixdorf is an exciting opportunity for both companies to shape the future of banking and retail solutions. Together, we can even better leverage the potential of a rapidly changing banking and retail market due to our strong combined R&D expertise.

With our complementary geographic presence, we will be even closer to customers worldwide. Our common view of omnichannel software solutions will enable us to create a best-in-class customer experience to support banks and retailers to cope with challenges of digitalization. Furthermore, we are convinced that our employees will benefit from being part of an even stronger, more global organization that is well positioned for the age of digitalization.

Digital transformation

The two companies share a complementary geographic reach across the Americas, EMEA and within Asia, as well as brand trust and recognized engineering expertise. Diebold has an established foothold in the Americas, while Wincor Nixdorf dominates the European market.

Currently, these largely matured markets are driving digital transformation in banking and retail industries alike. Diebold Nixdorf will have the opportunity to offer a broader range of services and solutions across its overall customer base.

The companies said that they expect their growth in both the software and services segments to be accelerated with a combined installed base of nearly 1 million automated teller machines worldwide. The combined company's strong service presence will also benefit Wincor Nixdorf's retail business, the release said.

Terms of the agreement

Terms of the agreement between the two public companies were outlined in the press release:

Based on the volume-weighted average share price of Diebold shares over the last five trading days prior to Oct. 17, 2015, the day on which the companies confirmed entry into a nonbinding term sheet for a proposed business combination, the total offer consideration represented an implied value of 52.50 euros ($55.74) per Wincor Nixdorf share.

This implied value represents a premium of approximately 35 percent over Wincor Nixdorf's closing share price as of Oct. 16, 2015, and a premium of approximately 42 percent over the volume-weighted average price per share over the last three months preceding that date. The corresponding enterprise value including net debt amounts to approximately $1.8 billion, or 1.7 billion euros, under these terms.

The combined company had pro forma revenue of approximately 4.8 billion euros ($5.2 billion), for the 12 months ended Sept. 30, 2015, excluding revenue attributable to Diebold's North America electronic security business, which it recently agreed to divest.

Upon successful completion of the offer and regulatory approvals, Diebold will consolidate the financial results of Wincor Nixdorf, and Diebold's earnings will reflect its proportionate share of Wincor Nixdorf's earnings.

The combined company plans to deliver approximately $160 million of annual cost synergies and will target a non-GAAP operating margin in excess of 9 percent by the end of the third full year, the release said.

Executive committee and board

Mattes will serve as CEO of the Diebold Nixdorf; Heidloff, 59, will serve as president. Diebold CFO Chris Chapman, 41, will serve as CFO of the combined company; Wincor CFO Jürgen Wunram, 57, will assume the role of chief integration officer and will represent the retail business in the executive committee. The combined company's executive committee of eight will be equally represented by business leaders from both Diebold and Wincor Nixdorf, including the four executives mentioned above.

Following the closing it is anticipated that along with the existing Diebold board members, three new directors will join the board of the combined company: Dr. Alexander Dibelius, chairman of the supervisory board of Wincor Nixdorf; Dr. Dieter Düsedau, member of the supervisory board of Wincor Nixdorf; and Eckard Heidloff.

To facilitate the integration, three Diebold executives will join the supervisory board of Wincor Nixdorf.

Committed financing

Diebold has committed financing in place. In addition to cash on hand, Diebold expects to raise approximately $2.8 billion to fund the transaction, refinance existing debt of both companies and provide liquidity. Permanent financing is expected to be comprised of a $500 million senior secured revolver and $2.3 billion of senior secured term loans and unsecured notes.

Following the transaction close, the pro forma balance sheet is expected to have net debt/EBITDA6 of approximately 4x. The combined company intends to shift its capital allocation plans to focus on deleveraging the balance sheet to be consistently below three times net debt/EBITDA by the end of year three.

Commensurate with this approach and after the transaction closes, the combined company intends to pay a dividend per share at a rate of approximately one-third of Diebold's current annual cash dividend per share, subject to market and other conditions. Moving forward, paying a dividend remains a part of the combined company's philosophy of returning value to shareholders, the release said.

Credit Suisse and J.P. Morgan acted as financial advisors to Diebold, along with Sullivan & Cromwell LLP, which served as legal advisor. J.P. Morgan and Credit Suisse are also providing committed financing for the transaction. Goldman Sachs acted as financial advisor to Wincor Nixdorf, along with Freshfields Bruckhaus Deringer LLP, which served as legal advisor.

About Suzanne Cluckey

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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.

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