The proposed merger between ChoicePoint Inc. (CPS) and Reed El Sevier NV (ENL) has been delayed as the Federal Trade Commission (FTC) has requested additional information and several state attorney generals are looking into the proposed deal. Although delayed, we believe the merger will ultimately be approved. With the acquisition price of $50 and the shares trading close to this level, we maintain a Hold recommendation on CPS shares.
On April 25, 2008, ChoicePoint announced results for the first quarter of fiscal 2008 ended March 31, 2008. The company entered into an agreement to sell its government software business, specifically i2 Inc. and i2 Ltd., to private equity group Silver Lake Sumeru in a cash purchase of $185 million.
Additionally, the company sold its iMap business to a private investment group in March 2008. During the quarter, ChoicePoint generated $43.9 million from operating activities of continuing operations versus $46.4 million in the fourth quarter. With $14.9 million in capital expenditures, the company recorded net free cash flow of $29 million during the quarter versus $34 million in the fourth quarter.
Although FTCâs request for additional information on the proposed merger between CPS and Reed Elsevier has delayed the closing of the merger, it is expected that the transaction will close later in the year. The acquisition will give shareholders $50 per CPS share in cash. As a result, CPS shares will gradually trade up to the $50 price as the closing date approaches. With CPS currently trading in the $48 range, we maintain our Hold recommendation with a $50 price target on the shares of CPS.
Read the full analyst report on CPS.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.