NCR Gets in the Tender Offer Game

NCRNCR’s (NCR) undertaking a tender offer now too. The company is offering to buy up to $1 billion of its own stock at a price between $26 and $29.50 per share. That’s good for up to 22.6% of its stock, if an overallotment of 2% is allowed. With the stock now at $26.42, there’s no chance of a risk-free profit here, however. And that makes it disadvantageous for investors who want to participate in the tender but didn’t own shares before the announcement. So it’s not my favorite type of tender. Still, the offer does have advantages for small shareholders.

That is, there is an odd lot priority for up to 99 shares, so investors could take a flyer on the stock and hope that they can make a quick hundred dollars or so, by putting in an ask price of about a dollar higher. However, they risk not selling their shares in the offer. That’s not really my style, and I’d prefer something that was nearly risk-free, as in a traditional tender offer at a fixed price.

NCR will pay for the tender with cash on hand of about $300 million as well as proceeds from what the company calls a “strategic investment.” This investment is an infusion of cash from Blackstone (BX), which is buying $820 million of the company’s newly issued perpetual convertible preferred stock. However, the offer is conditioned on the success of the strategic investment. So if this investment doesn’t close for whatever reason, the tender offer is over. In pursuing tenders I don’t like to have deal risk, and I’d rather see the company have cash on hand or cash and credit to pay the tender.

The offer expires on December 11, 2015 unless extended. You can read further details at this SEC filing.

Tender offers are great, low-risk money, but they are pretty rare, usually just 2-3 per year are actionable. Fortunately right now, (until early December) we have an excellent “take private” in process that can earn you several hundred dollars (nearly $750, as of November 1). Sign up for our special free report in the lower right pop-up box or send me an email in Contact box in the upper right. I’ll send you a special free report with all the details.

Leave a Reply