Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Cardtronics (NASDAQ:CATM) jumped more than 10% early Tuesday after the retail ATM specialist announced it will acquire privately held Welch ATM for approximately $160 million.
So what: The acquisition represents roughly one-tenth of Cardtronics' current $1.6 billion market cap and will boost the company's ATM portfolio by nearly one-third, to 109,600 machines worldwide. The deal also combines the two leading providers of retail ATM services to Walgreen and Rite Aid, for which Cardtronics and Welch respectively operate 5,100 and 3,100 ATMs.
Cardtronics CEO Steve Rathgaber discussed the benefits of the merger in a press release:
As a combined company, we can offer an expanded product set for customers and consumers, plus improved operational efficiencies. For our shareholders, by combining Cardtronics and Welch ATM, we will broaden our client mix and further our customer diversification. In doing so, we expect to drive higher earnings per share within the next 12 months.
Now what: The transaction is expected to close later in the third quarter, after which Cardtronics will update its fiscal 2014 guidance to reflect the effects of the acquisition. With shares of Cardtronics trading at a reasonable 13.7 times next year's estimated earnings -- and assuming those estimates are likely to increase once analysts fully digest today's news -- I think Cardtronics' stock should have little trouble continuing to reward patient investors from here.