U.S. hedge fund Wynnefield Capital said it is opposed to the sale of Checkpoint Systems Inc (NYSE: CKP), a U.S. provider of merchandise availability solutions for the retail industry, to Canada’s CCL Industries Inc. Wynnefield, which holds a 2.1 percent interest in Checkpoint, said the latter’s board has “accepted a take-under buyout based on a discounted EBITDA multiple and at a price that is 25 percent below where the stock traded just one year ago.” CCL, a specialty packaging business, agreed earlier this month to acquire Checkpoint for $556 million. North Star Partners, which holds a 3.9 percent interest in Checkpoint, also opposes the deal.
Wynnefield Capital Strongly Opposes “Take Under” Sale Of Checkpoint System To CCL Industries
Proposed Transaction Significantly Undervalues Checkpoint & Deprives Shareholders of Intrinsic Value
NEW YORK, March 30, 2016 /PRNewswire/ — Wynnefield Capital, Inc. and its affiliates (collectively, “Wynnefield Capital”), shareholders of Checkpoint System, Inc. (NYSE: CKP) (“Checkpoint” or the “Company”), with an approximate 2.1% ownership interest (as of March 30, 2016), today stated their strong opposition to the ‘take under’ sale of Checkpoint to CCL Industries (TSE: CCL.B).
Nelson Obus, President, CIO and Founder of Wynnefield Capital, said, “The deal price to which Checkpoint’s Board has agreed is utterly inadequate and an affront to the Company’s shareholders. Checkpoint is a company with a promising future – strong business fundamentals, including a blue-chip customer base, attractive recurring revenue, robust free cash flow and significant RFID opportunity growth. Checkpoint’s Board has chosen to forego the Company’s intrinsic value and accepted a take-under buyout based on a discounted EBITDA multiple and at a price that is 25% below where the stock traded just one year ago. Wynnefield Capital joins like-minded shareholders in urging Checkpoint shareholders to reject this value-destroying transaction.”
Poor Corporate Governance
Wynnefield Capital is deeply concerned with the Board’s longstanding, inferior corporate governance practices. These shareholder unfriendly practices enabled the shocking decision to sell the Company at a deep discount, depriving shareholders of long term value and likely simultaneously rewarding directors and management with undeserved change in control payouts.
Wynnefield Capital reminds Checkpoint shareholders and members of the investment community that just 10 months ago, Institutional Shareholder Services (ISS), one of the leading proxy advisory firms, analyzed the Company’s governance practices and awarded Checkpoint a risk rating of ’10,’ the lowest possible rating that can be awarded to any company.
At the time, ISS urged shareholders to vote against an advisory vote on executive compensation, citing the lack of alignment of pay with stock price performance and use of above-median benchmarking for executive compensation. Checkpoint shareholders heeded ISS’ guidance, overwhelmingly voting against the Company’s compensation plan and sending an unambiguous message to Board. Yet, the Company once again ignored shareholders’ wishes and instead of implementing changes, the Board rewarded the head of Checkpoint’s compensation committee by promoting him to Chairman.
This is the track record of a Board that should not be trusted as fiduciaries and the disastrous deal with CCL is further evidence of that. Therefore, shareholders should be given the opportunity to vote for the nominees who they feel most properly represent their best interests.
Wynnefield Capital takes note of North Star Partner’s stated intention to nominate a slate of director nominees at Checkpoint’s 2016 Annual Meeting of shareholders. Should North Star Partners, one of Checkpoint’s largest shareholders, file the requisite proxy statement and accompanying materials, Wynnefield Capital will closely analyze the qualifications of its nominees and strongly consider supporting their candidacies.
About Wynnefield Capital, Inc.
Established in 1982, Wynnefield Capital, Inc. is a value investor specializing in U.S. small cap situations that have company or industry-specific catalysts.
Mark Semer or Daniel Yunger
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