Fallout from the Diebold bid

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03/04/2008
I thought you guys might be interested in how the consumer press is treating this UTC bid for Diebold. Here's a round-up: The AP, per usual, plays it pretty straight, which is a good thing. They let the analysts do the talking: Nicholas Heymann, an analyst at Sterne Agee, said Diebold's board of directors will be under pressure to sell. "Here's $40. See if there's any way in the world you can explain to shareholders you'd be up to $40 in the near future," he said. ... Page Davidson, a lawyer for Bass, Berry and Sims in Nashville, which typically represents sellers in acquisition deals, said the price offered by United Technologies will be hard to reject. "At that kind of premium, it's going to be pretty difficult to not engage in some kind of process now in response to pressure from the shareholder base," he said. "The board's fiduciary duty is to take the action it believes is in the best long-term interest of shareholders." But here's my favorite quote: Nigel Coe, an analyst at Deutsche Bank-North America, called Diebold a "fixer-upper." Then, in another AP story, there's talk that the bid will be upped: Robert W. Baird analyst Reik Read said United Technologies will make a larger offer after Diebold holds its annual meeting in the spring. He believes Diebold is worth at least $45 per share, and possibly more than $50. Read upgraded the stock to "Outperform" from "Neutral," and raised his price target to $45 per share from $29. "We anticipate United Technologies may raise its bid, and believe there are other potential suitors for Diebold, including Wincor, Tyco and Honeywell," he wrote. Jefferies & Co. analyst Yvonne Varano agreed that another bid could come, but downgraded the stock to "Hold" from "Buy," saying it will be some time before Diebold is willing to consider an offer. More than $50 a share? Nearly a 100 percent premium? You'd think shareholders would be happy with that, no? Now for some opinion pieces. The Wall Street Journal's "Deal Journal" interviewed an MIT poli-sci professor, asking if UTC knows what it's getting into with the whole Diebold voting machine debacle. Here's an interesting selection: DJ: What advice would you give UT? SA: My advice would be, be very, very open. People ran into problems on the PR side because they didn’t share their software. The key is to lead the way toward open-sourcing the software. This is an industry that was built on trade secrets and not intellectual property. So my advice to them would be to change the industry and take the lead on open-sourcing. They would win over the computer-science world which has been crazy to get open-source developed for voting technologies. That would be the really interesting strategic step they could take. And it would help with the questions of secrecy, which have really dogged Diebold. I would try to turn the whole Diebold electronic voting conspiracy theory on its head, and they could do that with out compromising the integrity of the system and probably improving it. Hey, I'm a security guy, but I know integrators love open-architecture, so I'm all for that. But I guess there's some question if that would make the voting machines really easy to rig. In the long term, though, I'd be shocked if UTC kept the voting machine business going. I'd bet they'd just jettison that altogether. This is a financial services play, pure and simple, if you ask me. Here's the Barron's blog take on the offer. Bob O'Brien notes that while for some the offer came as a surprise, For United Tech, it has been a marathon, not a sprint: the company began trying to woo Diebold over two years ago. Diebold itself said that its board has kicked UTX’s interest around routinely, including three times in the last month alone, but always comes to the same conclusion: it’s not interested. Well, isn't he the dialed-in insider type. And I'd be remiss if I didn't include some of the whack-jobs in the round-up. Here's a brilliant little number from opednews.com (the title of which makes no sense to me - is it op-ed, or is it news?). It's all gobbeldy-gook nonsense, but here's my favorite paragraph; Thus far, Diebold’s board has rejected United Technologies’ $2.6 billion offer. However, the multinational is very likely not to give up and could take the offer to the shareholders of Diebold. So, we may see the next election counted in large part by a defense contractor. They already virtually determine the outcome of elections through their contributions and their control of the media, e.g. GE’s ownership of NBC. If this purchase goes through, they will be counting the vote in secret with no independent review. Um, 1. the offer is to the shareholders, 2. just because you make the machine that does the counting doesn't mean you actually do the counting (i.e., Braun made my coffeemaker, but I still had to wake up and make my own dang coffee this morning), 3. I love how UTC magically becomes GE in this paragraph; does this dude think that the boards of directors of UTC and GE commiserate on how to screw the American people? I'm guessing they don't talk to each other much, 4. again, does this guy really think UTC will somehow be counting votes in secret with no independent review - like local election officials are just witless morons? My local election officials are ornery and extremely wary of outsiders. I'm guessing they're not just going to cede all of their responsibility because someone made a voting machine for them.