Banta Corporation (NYSE:BN) announced yesterday that they had received a letter from Cenveo dated September 20th, in which Cenveo proposed a business combination transaction involving the company. Banta said that it "is in the process of reviewing the proposal and will respond to Cenveo as appropriate in due course". What did this letter say? Well, Cenveo had a few kind words for Banta's Board regarding the transaction:

"As you might expect, following our prior proposals to acquire Banta, we were amused to read in your press release on September 14th that Banta has adopted "strategic initiatives" to "create value for shareholders." At Cenveo, we are always working to create value for shareholders and do not wait until we have received proposals from third parties to do so

We were also disappointed to hear on your carnival-like conference call that you continue to refer to Cenveo's $47.00 per share fully-financed, all-cash proposal for Banta's shares as "illusory". To reiterate what I stated in my letter of September 5th, we have obtained committed financing to complete this acquisition from Lehman Brothers and Wachovia ... I personally believe that you and the Banta board have breached your fiduciary duties to shareholders by taking actions to entrench yourself by not responding to my September 5, 2006 letter and the $47.00 per share proposal to purchase Banta.

Further, to say, as you did on your call, that we were unable to reach an agreement on the terms of a "standard" confidentiality agreement is a joke. We have offered to meet with you and to provide you with information about our commitment from Lehman Brothers and Wachovia WITHOUT OBTAINING ANY CONFIDENTIAL INFORMATION FROM YOU. Why do you need a confidentiality agreement when we are not asking for any confidential information at this time?

The fact that you and your board continue to hide behind your poison pill is in my view 110% un-American. A level playing field is required in order to permit Banta shareholders to decide who manages their company, not a poison pill. As you stated on your most recent conference call, your poison pill is in place to "make sure that your shareholders have the benefit of long-term look at the future." Shareholders now have had plenty of time to review your plan. Therefore, the pill is no longer necessary and we believe it is the board's fiduciary obligation to remove the poison pill and let the shareholders decide the future of Banta."

But is $47 a good deal for shareholders? Well, the stock was trading at around $50 before the company durastically lowered is FY 2006 guidance in July before raising them suddenly in September. However it is difficult to argue that the company is undervalued right now. Although it has a PE of around 17x, it has a PEG of almost 2.87, which is highly overvalued. The company does have a strong cash position and low debt; however, the company is still trading well above its enterprise value. Either way you look at it, $47 is a good price for this stock unless management is capable of executing some other plan to unlock shareholder value in the near term, which doesn't appear to be the case.

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