Banta Corporation (NYSE:BN) announced today in a press release that it has rejected Cenveo's increased bid to buyout the company. We covered Cenveo's bid in a previous article in September, when they offered $47/share for the company and called the company's actions "110% un-American". Cenveo also threatened to take other actions, which were not detailed. The only way for them to acquire the company without shareholder approval of a bid is through a hostile takeover, where Cenveo would begin acquiring Banta share on the open market until they achieve a majority position (which would be reported in 13D filings with the SEC). Then, they could nominate their own directors to the Board and attempt to take over the company in a proxy battle. However, this is a very expensive process, making it an unlikely scenario. The alternative is for them to raise their bid even higher, in hopes that the Board will approve.

In the press release, Banta also said it would seek other ways to increase shareholder value:

"The Board has authorized management, in consultation with its financial advisor, UBS Investment Bank, to explore all potential strategies for further maximizing shareholder value, including, but not limited to, remaining independent, joint ventures, mergers, acquisitions, further return of capital, or the sale of the Company ... The Company also advised that it does not intend to disclose developments regarding its evaluation unless, and until, a final decision is made."

The Board is most likely hesitant to sell the company at $47 because the stock has already traded as high as $52 this year - the only reason Cenveo was able to place an offer at such a premium is because the company's stock dropped to $34 after they lowered their FY 2006 guidance. As a result, the Board may see this offer as not having the premium that most people expect when buyout offers come. Moreover, Cenveo may have problems convincing other shareholders to sell out at this price for the same reason - many shareholders may have been buyers in the $50's, so the $47 offer does not represent a premium.

What happens with the evaluation of strategic alternatives remains to be seen. Cenveo has called this process a joke, stating that management never had any intention of doing anything to help the company's shareholders. However, if the company does follow though with its review process, it could result in a special dividend, share buyback program, or even a sale, which could open up the company to a bidding war. The results of this can be found in the company's future 8K filings, while any hostile action by Cenveo will be first seen in future 13D filings. This stock is definitely one to keep an eye on!

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