Radiant Systems shares Pop on Upcoming Tender Offer

Radiant Systems shares Pop on Upcoming Tender Offer

Shares of Radiant Systems, Inc. (Nasdaq: RADS) soared more than 30% to a last decade record of $28 today, shortly after NCR Corp.n (NYSE: NCR) offered to purchase RADS for $1.2 billion in cash. Both companies make cash registers, automated teller and point-of-sale machines, as well as other transaction systems and associated software applications, with Radiant having a strong position in the hospitality and specialty-retail markets.NCR scheduled a cash tender offer of $28 for every share of Radiant that will start on July 25 and will be open for a period of at least 20 business days. At that price, the tender offer represents a 30.5% premium over the company’s stock closing price of $21.45 on Monday. The deal is expected to close in the third quarter, pending regulatory approval.

Radiant is a global provider of innovative technology and services to the hospitality and retail industries. With more than 100,000 installations worldwide, the company’s customers include leading brands and venues in the restaurant and food service, sports and entertainment, petroleum and convenience, and specialty retail markets. The company has delivered 15% compounded annual revenue growth over the last five years, along with significant margin expansion due to strong demand for its software offerings.

Radiant gained nearly 25% over the last three months after first-quarter results topped analyst estimates and the company revisited upward the outlook for 2011. Revenue for Q1 2011 increased 10% to $87.1 million, meeting analyst expectations. Expanding margins brought a 64% surge in adjusted earnings from $5.8 million or $0.17 per share in Q1 2010 to $9.5 million or $0.23 per share in Q1 2011. Analysts polled by Thompson Reuters expected Radiant to earn $0.20 per share.

Strong business momentum and increased visibility inspired management to raise full-year guidance for both revenue and earnings. The company now expects revenue to range from $375 million to $385 million in 2011, up from previous range of $370 million to $380 million. Adjusted earnings are expected to range from $0.97-$1.01 per share, up from previous expectations of $0.95-$0.98 per share. Analysts expect RADS to earn $1.02 a share on revenue of $385 million.

NCR plans to turn Radiant into a new business division that would focus hospitality and specialty retail segments. NCR reported it plans to take advantage of Radiant established position in quick-service and table-service restaurants, specialty and convenience retailers and entertainment venues by combining the offerings of both. Several executives from Radiant will remain on board and will be led by the company’s chief operating officer Andrew Heyman.

The margins improvement in the first quarter of 2011 has popped Radiant during this year; however the company has additional internal reserves to further enhance margins and improve profitability. In addition, the accelerated growth positions the company well to leverage operating expenses and, consequently, provide additional gains to its shareholders.

NCR’s global footprint, brand recognition and track record of innovation combined with Radiant hospitality and retail markets footprint as well as outstanding customer support enable the combined company to accelerate the growth and generate margin expansion and earnings appreciation. The takeover offer recognizes Radiant potential and the 30% premium to current valuation would most likely convince the company’s shareholders to support the transaction and accept the offered premium.

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