ES&S Buys Premier (Diebold) Election Systems, for Near-Monopoly in U.S. Vote Count

Diebold Exits US Voting-Machine Business

By Veronica Dagher, Dow Jones Newswires, September 03, 2009

Diebold Inc. (DBD) has sold its money-losing U.S. election-systems business, just seven years after acquiring it amid hopes of rising demand for voting technology upgrades in the wake of the 2000 presidential election fiasco.

Diebold, whose main business is making automated teller machines, said Thursday it sold the voting-machine unit to privately held Election Systems & Software Inc. for $5 million, about one-fifth of what it paid in 2002.

"There were assumptions we made in that space that didn't materialize," Diebold spokesman Mike Jacobsen said, referring to the fact U.S. municipalities didn't adopt standardized voting systems.
========================================================

'Diebold has agreed to sell its elections systems business
for $5 million in cash plus future cash payments
representing 70% of any cash collected on the outstanding U.S. election systems business accounts . . .
As a result of this transaction, Diebold expects to recognize a pre-tax loss in the range of $45 million to $55 million'

--from Diebold Press Release, 09.03.09
===========================================================
Problems with paper ballots in the presidential election in 2000, which delayed the final tally and generated concerns about the legitimacy of the outcome, sparked calls for improved election systems. A federal law was passed in 2002 to provide states $2.32 billion to make required voting-technology upgrades, and industry watchers had expected standardization to follow.

Standardization - in which all voting districts would use machines built to the same specifications - would have cut down on costs of customization, but guidelines were never finalized.

Diebold, which was the industry's biggest maker of electronic voting machines heading into the 2004 presidential election, was in the spotlight as concerns increased about the reliability and security of the electronic systems.

Diebold also suffered from a perception problem when the company's then-Chief Executive Walden O'Dell very publicly supported and fundraised for President George W. Bush in his re-election campaign.

In early 2006 the company, based in North Canton, Ohio, identified the voting-systems business as non-core and started exploring a possible divestment. It essentially separated the business from the rest of Diebold in August 2007, renaming it Premier Election Solutions. Since then, Diebold maintained only a financial interest.

In the second quarter, revenue for Premier Election tumbled 65% to $9.6 million, a fraction of Diebold's total revenue for the period of $700.5 million. The company wouldn't specify how much it lost in the elections business.

Diebold will record a pretax charge of $45 million to $55 million as a result of the sale. The company's Brazilian voting systems subsidiary isn't affected by the Premier Election sale.
Diebold shares gained 2.2% Thursday to finish at $30.69.

Election Systems & Software, based in Omaha, Neb., said in a release that the combination with Premier Election will allow each business to serve jurisdictions more effectively.

Wedbush Morgan Securities analyst Gil Luria said the U.S. elections business is past its 2006 peak, when municipalities were stocking up on election equipment. Luria estimates the U.S. elections industry to be a $200 million to $300 million a year business.

He said Diebold's exit leaves the top privately held competitors - Election Systems & Software and Sequoia Voting Systems - room to gain market share. "There could be more consolidation in the space," Luria said.

Copyright (c) 2009 Dow Jones & Company, Inc.

Diebold Press Release
http://www.news.diebold.com/article_display.cfm?article_id=5006 [1]
SOURCE: Diebold, Incorporated
03 September 2009

Diebold Sells U.S. Elections Systems Business to ES&S

NORTH CANTON, Ohio, Sept. 3 /PRNewswire-FirstCall/
Diebold, Incorporated (NYSE: DBD) announced today that it has sold its U.S. election systems business, primarily consisting of its Allen, Texas-based subsidiary, Premier Election Solutions, Inc., to Election Systems & Software, Inc. (ES&S), a leading company in the election systems industry. The sale was consummated on September 2.

Diebold has agreed to sell its elections systems business for $5 million in cash plus future cash payments representing 70% of any cash collected on the outstanding U.S. election systems business accounts receivable as of August 31, 2009. As a result of this transaction, Diebold expects to recognize a pre-tax loss in the range of $45 million to $55 million. The pre-tax loss includes the assets and liabilities of the business, certain retained legal liabilities, and other transaction costs. This business will be reported as a discontinued operation. Excluding the impact of this divestiture, Diebold's full-year earnings per share outlook for 2009 remains unchanged.

Diebold entered the U.S. election systems business after purchasing Global Election Systems, Inc., in January 2002. Since early 2006, Diebold has identified its U.S. elections systems business as non-core to its operations and has been pursuing strategic alternatives to ownership, including divestiture. In August 2007, Diebold announced it had realigned its U.S. elections systems subsidiary to operate as an independent entity and renamed the company, Premier Election Solutions. Since that time, Diebold has maintained only a financial interest in Premier with no direct operational involvement. In 2008, Premier generated $88.2 million in revenue, or 2.8 percent of Diebold's total reported revenue for the year.

The company's Brazilian subsidiary, which manufactures voting terminals for Brazil's national elections board, the Tribunal Superior Eleitoral (TSE), is not affected by the sale of Premier Eection Solutions.

Diebold, Incorporated is a global leader in providing integrated self-service delivery and security systems and services. Diebold employs more than 17,000 associates with representation in nearly 90 countries worldwide and is headquartered in Canton, Ohio, USA. Diebold is publicly traded on the New York Stock Exchange under the symbol 'DBD.' For more information, visit the company's Web site at www.diebold.com [2], or visit www.diebold.com/150 [3] to learn more about Diebold's 150-year history.

SOURCE Diebold, Incorporated
Media: Mike Jacobsen, +1-330-490-3796, [email protected];
Investors: Christopher Bast, +1-330-490-6908, [email protected] [4]

NJ Federal Court TRO Hearing on ESS-Premier Merger

Source: BLT, The Blog of Legal Times
http://legaltimes.typepad.com/blt/2009/09/judge-to-consider-blocking-mer... [5]

Judge to Consider Blocking Merger of Two Voting Machine Makers

September 28, 2009

Tomorrow morning, a New Jersey federal judge will hold a hearing to decide whether to block the merger of the nation's two largest vote counting companies.

Jonathan Rubin, a Washington-based Patton Boggs partner who represents Hart InterCivic Inc., a smaller voting-machine maker, has asked Judge Robert Kugler of the U.S. District Court for the District of New Jersey to issue a temporary restraining order, alleging that the merger of the voting division of Ohio-based Diebold and Election Systems & Software poses a "threat of irreparable harm" to voters.

The combination of the two voting-machine giants would give ES&S control of election systems used in nearly 70 percent of the country's voting precincts.

Rubin said that jurisdictions across the country, which select voting machines based on competitive bids, would have little choice but to use the systems offered by ES&S if the acquisition goes through.
“As our economist says, we’re not talking about shampoo. These companies are in the business of something that is essential to the function of democracy,” Rubin said.

Rubin said his client is seeking to have ES&S divest Diebold Inc.'s Premier Election Solutions, the company’s voting division, but would also accept having the judge order ES&S to keep Premier Election Solutions as a separate, standalone company.

The merger has also drawn the attention of Sen. Charles Schumer (D-N.Y.), who has asked the Justice Department to review the acquisition.

A spokesman for ES&S did not immediately respond to requests for comment.
===============
Posted by Jeff Jeffrey on September 28, 2009 at 04:13 PM

Schumer Asks DOJ Review of ESS-Premier Merger

http://www.ajc.com/business/justice-dept-review-of-138396.html?cxntlid=d... [6]

Justice Dept. Review of Vote-machines Sale Sought

The Associated Press 9.14.09

NORTH CANTON, Ohio — Sen. Charles Schumer on Monday asked the Justice Department to review Diebold Inc.'s sale of its U.S. voting-machine business to a bigger competitor, saying he is concerned it could have an adverse impact on American voting.

Diebold, of North Canton, earlier this month announced the sale of its Allen, Texas-based subsidiary Premier Election Solutions Inc. to Election Systems&Software Inc. of Omaha, Neb.

Schumer, chairman of the Senate Rules and Administration Committee, said the sale would give one company control over three-quarters of the U.S. market for voting systems.

"Since this industry provides a product vital to American governance, I am asking that the (Justice Department's) antitrust division examine this acquisition carefully to make sure there is no anticompetitive impact on election officials, states or voters," the New York Democrat said in a letter to Attorney General Eric Holder.

Schumer said a 2003 Congressional Research Service report raised concerns about the consolidation of voting systems.

"The report indicates that having a diversity of voting systems in our country may decrease the likelihood of widespread election fraud," Schumer said.

The Justice Department declined to comment.

Diebold spokesman Mike Jacobson said the transaction is closed and referred questions to ES&S. ES&S spokesman Ken Fields said the transaction will result in stable service and sustainable support for upcoming elections.