Private equity firms Blackstone Group and Carlyle Group are preparing for one of the biggest deals of the year. According to the reports the two private equity giants are offering over $10 billion for the US company NCR, which manufactures cash registers and ATMs.
Several news outlets started reporting the deal on Tuesday, with speculation heating up on Wednesday. The private equity firms have not officially come forward to the press with the announcement, but people familiar to the matter have suggested the firms are preparing to outbid other buyout firms.
The reports follow the announcement by NCR earlier this year, which suggested the company is looking for options, as shareholder pressure on the board has heated up.
One of the companies involved in NCR, Marcato Capital Management, has been telling the board to explore strategic alternatives since last year. According to Dispatch, Jana Partners is another firm with a 7% passive stake in the company.
JP Morgan Chase & Co. is in the early stage of vetting the potential buyers for the company. According to Bloomberg, the bank is hoping to receive at least $36 per share.
Mixed Results in Recent Months
NCR has tried to venture into the software sector, which has proven to be a tougher task for the Dayton-based company. It recently launched its own cloud-based software system aimed at ATM machines. The Kalpana software is meant to replace the old-fashioned PC software in a bid to cut costs.
The company has been hit by a cut in spending in the US by retail companies. Retailers are NCR’s biggest customer group and the decline in spending by the retailers has hit revenue streams.
NCR reported a net income of $191 million in 2014. This was a notable drop from $443 the previous year. In a more recent development, the company’s revenue declined 3% in the first quarter of the year to $1.48 billion.
To some analysts the mixed results in recent month are a clear indicator that the reported asking price is too high. Gil Luria, technology analyst at Wedbush Securities, told Bloomberg, “The price seems high. NRC is highly levered, not generating much cash flow and barely growing.”
Private Equity Interest
Despite the mixed results, the company has attracted quite a bit of interest and even the $10 billion bid might prove unsuccessful. According to the Dispatch reports, several other private equity firms are still in the mix and there could be another joint venture by these firms in an effort to outbid Blackstone Group and Carlyle Group.
According to the reports, Apollo Global Management and Thoma Bravo are among the firms interested in NCR.
If the $10 billion deal, which includes NCR’s debt, goes through it would be among the biggest LBOs since the financial crash. It would also mark a rare joint effort by the world’s largest private equity firms, which don’t usually team up in this style.
The news about a possible private equity buyout has certainly lifted the share price for NCR. After the news, the stock went up by 11%, extending the year’s gain to 19%.