Are Checkpoint Shareholders Getting Enough in the Buyout?

Checkpoint Systems Inc. (NYSE: CKP) made a massive move early in Wednesday’s session following news of an acquisition. CCL Industries announced that it has entered into a definitive merger agreement with Checkpoint to acquire its all of its outstanding shares for $556 million, including the assumption of $44 million of net cash.

Under the terms of the agreement, the transaction price breaks down to $10.15 per share, which represents a premium of 28.6% from Tuesday’s closing price. This price also represents a premium of 58.8% from the 50-day moving average and 31.5% from the 200-day moving average.

Looking at what the analysts have to say, Thomson Reuters has consensus estimates that predict revenues of $595 million for Checkpoint Systems in 2016. This is expected to be immediately accretive to CCL, with up to $40 million in “highly realizable synergies.”

The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in mid-2016. However, this merger is still subject to regulatory and customary closing conditions.

Geoffrey T. Martin, president and CEO of CCL, commented on the merger:

We have admired Checkpoint for many years as they built a unique, leading global position providing technology-driven label solutions to the retail & apparel industry. We are very pleased to welcome their deeply experienced people to CCL where they will continue to focus on this important industry for emerging ‘smart label’ technologies.

So far in 2016, Checkpoint shares have outperformed the broad markets, with the stock up 60% year to date. However, over the past 52 weeks the stock is actually down roughly 22%.

Shares of Checkpoint Systems were last seen up 27.4% at $10.05, with a consensus analyst price target of $11.50 and a 52-week trading range of $5.07 to $13.58.

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