Checkpoint Systems Inc, maker of merchandise protection products for retailers, is expected to receive a letter from activist investor MMI Investments LP on Wednesday, requesting the company seek a strategic review, according to the contents of the letter obtained by Reuters.

MMI Investments, also known as Millbrook Capital Management Company LLC, wrote in its letter to Checkpoint's board of directors that the company is significantly undervalued given its strong products, technology, market positions and customer relationships.

As one of Checkpoint's largest shareholders, with a current stake of 4.9 percent, the New York-based hedge fund said recommendations it had suggested privately to the board, and chairman and CEO Rob van der Merwe since June 2011 to increase shareholder value had fallen on deaf ears.

We have recommended that Checkpoint hire an investment banker to explore strategic alternatives, which the board summarily dismissed. We have attempted to connect Checkpoint with those who are highly qualified and potentially interested in buying the company, to no avail, Jerome Lande, partner of MMI Investments wrote in the letter.

The letter, dated August 10 and addressed to the board, also mentioned the activist's recent request to have an MMI representative appointed to Checkpoint's nine-member board, an option that was also rejected.

MMI Investments plans to file a schedule 13-D with the Securities and Exchange Commission, indicating that it has accumulated over 5 percent stake in the company.

As of Tuesday's close, Checkpoint had a market capitalization of $576 million. The shares closed up almost 10 percent to $14.37.

Philadelphia, PA-based Checkpoint has over the last three decades built a suite of products that primarily focus on reducing shrink, or merchandise lost through employee theft, shoplifting, vendor theft and paperwork errors, for retailers ranging from supermarkets to apparel.

MMI Investments said Checkpoint's stock has been negative every year for the last eight years and has underperformed the S&P 500 as well as small cap indices, including the Russell 2000. Analysts have estimated a 12-month target price of between $20 to $25, the lower range based on operational challenges in the retail and apparel end-markets globally and the higher share price reflecting recent high levels of unemployment increasing shrink in the developed world.

Our analysis suggests that a transaction could yield a stock price in the low-to-mid $20s, assuming acquisition by a financial sponsor at 7.5x to 8.5x the midpoint of the company's 2011 EBITDA guidance, and potentially well above that with a strategic acquirer, Lande said in the letter.

MMI Investments is no stranger to activism. Most recently, the hedge fund won its several month shareholder battle against EMS Technologies. The activist had requested that EMS hire an independent special committee to run its sale process and nominated a slate of nominees to the company's board of directors.

EMS, which provides wireless connectivity solutions over satellite and terrestrial networks, eventually sold itself in June to Honeywell International Inc for $506 million in cash.

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