Over 30% Pop For NCR Shares?

Jul. 01, 2022 10:00 AM ETNCR Corporation (NCR)APO, NCRRP, TSLA, TWTR11 Comments4 Likes

Summary

  • Today, NCR costs about $30.
  • Tomorrow (well, at least soon), it could get a $40 bid.
  • Not many deals are getting done, but this one might.
  • Looking for a helping hand in the market? Members of Sifting the World get exclusive ideas and guidance to navigate any climate. Learn More »

Thirty percent on white background. Isolated 3D illustration

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Pre-arbitrage

Outcomes are often clearer once definitive merger agreements are signed, at least signed between anyone other than Tesla's (TSLA) Elon Musk and Twitter (TWTR), but more money can be made by scooping up cheaper shares before a deal announcement. Here's one such opportunity.

Who?

NCR (NYSE:NCR) provides software and services in banking, retail, hospitality, and telecom and technology segments.

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NCR

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NCR

What?

This is a perfectly awful time for LBOs in terms of the equity and credit markets. Not that many new deals are getting announced. It's hard or impossible for banks to syndicate debt. But NCR is a perfect LBO target. Private equity could pay $40 per share and make a deal work for at least a 20% IRR over the next five years.

When?

NCR will probably collect final bids in July in time for a definitive deal signing in late July or early August, possibly when they announce the second quarter earnings in the first week of August. Bidders could include Veritas and Apollo (APO). Large NCR holders support such a sale.

Where?

They are headquartered in Atlanta, Georgia.

Why?

The company started a strategic review in February. They sound as if they are on track with that process. One option is to sell the company as a whole. Alternatively, they could split into segments.

Caveat

The financing environment is bad, necessitating private equity buyers to put up a big check of somewhere between a quarter and a third equity.

Conclusion

NCR will probably have a buyer by this time next month. The price will probably start with a "4."

TL; DR

Buy NCR.

Like underpaying for bargains?

Here's one more.

This article was written by

Chris DeMuth Jr. profile picture
35.43K Followers
Value, arbitrage, and event driven top performing ideas
Chris DeMuth Jr (ccdemuth@rangeleycapital.com) founded event driven hedge fund Rangeley Capital LLC and research service Sifting the World


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Disclosure: I/we have a beneficial long position in the shares of NCR, TWTR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: https://seekingalpha.com/instablog/957061-chris-demuth-jr/5549358-legal-disclosure

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