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NCR Corp (NCR) Acquires Cardtronics: Why Does it Make Sense?

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NCR Corporation (NCR - Free Report) recently announced entering into a definitive agreement to acquire Cardtronics (CATM - Free Report) in an all-cash transaction. Per the terms of the deal, NCR will pay $39 for each Cardtronics’ shares, translating into an enterprise value of $2.5 billion, including debt. The transaction is anticipated to complete in mid-year 2021.

Notably, earlier this month, NCR had submitted an acquisition offer to Cardtronics. NCR’s proposal was higher than the earlier bid made jointly by Apollo Global Management (APO - Free Report) and Hudson Executive Capital.

On Dec 15, 2020, Cardtronics entered into a definitive agreement to be acquired by funds managed by affiliates of Apollo Global Management and Hudson Executive Capital, for $35 per share in cash. The firms had earlier proposed to acquire it for $31 per share.

Why Does the Acquisition Make Sense for NCR?

Cardtronics processes value-added payment transactions and provides ATM solutions to financial service providers in a bid to aid in-store traffic and retail transactions. Moreover, it enables cash transactions at more than 285,000 ATMs across 10 countries. It also provides a retail-based surcharge-free ATM network through its Allpoint Network across more than 55,000 locations.

Markedly, the proposed acquisition is anticipated to drive the acceleration of the NCR-as-a-service strategy. Cardtronics’ robust debit network will further expand NCR’s payments platform and help it connect to retail and bank customers, thereby facilitating customer acquisition.

Moreover, the integration will give the company access to Cardtronics’ installed base of ATM network across multiple regions. This will support the company to enhance its scale of business and boost cash flows. It will also help the company capitalize on the ongoing transition of the banking industry toward outsourcing of ATM operations and branch rationalization.

Apart from these, the buyout bodes well for NCR’s steady focus to advance its software and services revenue mix, and drive margin expansion by increasing the company’s recurring revenues.

NCR believes the acquisition of Cardtronics would be accretive to its adjusted EPS in the first full year following the transaction’s conclusion. In addition, it projects achieving $100-$120 million in operating cost synergies by the end of 2022.

Zacks Rank and A Key Pick

NCR currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is Square (SQ - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Square is currently pegged at 33%.

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