Are Shareholders Getting Enough in the AS&E Acquisition?

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Shares of American Science & Engineering Inc. (NASDAQ: ASEI) jumped early on Tuesday following news of an acquisition. Given AS&E’s recent performance, the question is whether shareholders are getting enough in this deal, or if perhaps the acquirer is paying too much.

The company announced that it has entered into a definitive agreement to be acquired by OSI Systems Inc. (NASDAQ: OSIS) for $37 per share of AS&E common stock in an all-cash transaction. The total transaction is valued up to approximately $269 million.

The transaction and the merger agreement were unanimously approved by AS&E’s board of directors, but it is still subject to shareholder and regulatory approval. The transaction is expected to be completed by the end of 2016.

Prior to Tuesday’s move, AS&E’s stock had fallen about 22% year to date, while over the past 52 weeks the stock has fallen 26%.

The transaction price offers a premium of 14.4% from Monday’s closing price of $32.34. Compared to the 50-day ($32.72) and 200-day ($30.16) moving averages, the transaction represent premiums of 13.1% and 22.7%, respectively.

Chuck Dougherty, AS&E’s president and CEO, commented:

We are pleased to have reached this agreement with OSI Systems, which provides our shareholders with a compelling cash value and follows a thorough review of strategic alternatives for the Company. After a careful assessment of conditions in our markets worldwide, the Board determined that entering into this transaction was in the best interest of our shareholders.

Deepak Chopra, OSI Systems’ chairman and CEO, commented:

AS&E’s backscatter X-ray technology has long been a leader within the security industry, and its cutting-edge products, extensive service network, and premier customer base are highly complementary to our current operations.  We look forward to welcoming AS&E’s talented team to OSI Systems and we expect to maintain AS&E’s current operations in Billerica, MA as an essential part of an expanded security scanning business unit.

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Shares of AS&E were trading up 13.8% at $36.81 on Tuesday, with a consensus analyst price target of $29.00 and a 52-week trading range of $22.63 to $46.46.

OSI shares were up 5.4% at $55.50, within a 52-week trading range of $48.19 to $96.75. The consensus price target is $64.50.