Checkpoint Systems, a provider of RFID products for inventory management and merchandise protection, announced today that it will acquire RFID application and middleware provider OATSystems in an all-cash transaction expected to close within the next two weeks.

According to the two companies, OAT offers complementary applications that will enhance Checkpoint’s presence in the retail sector. Specifically, OAT software processes large quantities of data from RFID hardware to help retailers obtain accurate inventory levels and ensure on-shelf availability of merchandise.

“OAT has traditionally focused on three markets — manufacturing, retail, and CPG — so there are some obvious and logical points of synergy between Checkpoint and OAT,” said Paul Cataldo, vice president of marketing at OATSystems, in an interview today.

OAT will operate as a separate business unit within Checkpoint, Cataldo said, and will maintain its manufacturing focus. “We are continuing to add more customers in that vertical as we move forward,” he said.

In the retail sector, Checkpoint officials told Manufacturing Executive, OAT’s application and middleware technology will augment Checkpoint’s inventory management products aimed at reducing merchandise theft.

Checkpoint’s acquisition of OAT was “not a complete surprise,” said ABI Research Analyst Pete Poorman. “It seems to make sense that there would be some consolidation in the RFID space,” although the acquisition of a horizontally focused company by a vertically oriented provider, such as Checkpoint, makes it particularly interesting, he said in an interview.

“The addition of OATSystems provides Checkpoint with multiple avenues for expansion into higher-growth markets,” said Rob van der Merwe, Checkpoint president and CEO, in a statement.

Poorman agreed, saying the OAT technology should boost Checkpoint’s initiatives on the retail store front while serving as an entrée into “naturally adjacent” spaces, including the back room and the supply chain.

OAT will help Checkpoint move toward its goal of “helping customers lose less and helping them sell more,” said Farrokh Abadi, senior vice president of worldwide operations for Checkpoint, in an interview. OAT’s RFID technology will be used to enhance Checkpoint’s Evolve electronic article surveillance platform. With the OAT technology, Checkpoint will be able to help customers using Evolve for inventory management migrate from traditional electronic article surveillance (EAS) to a combination of EAS and RFID so that they can process higher quantities of data than possible with EAS alone.

“Unless customers are able to make sense of their data and create actionable insight from it, it’s of no use,” Abadi said. The OAT RFID technology will “allow us to be a one-stop-shop” for inventory visibility, he said.

According to Poorman, the acquisition is indicative of the general maturing of the RFID market and the growing awareness of the technology. “People are starting to realize that the technology does work and can have a positive ROI,” he said. “What remains to be seen is whether this acquisition will trigger further consolidation in the industry.”

Officials said that the members of OAT’s senior management team, including Michael George, president and CEO, will stay on board to run the new business division of Checkpoint. Officials also noted that an alliance between Oracle and OATSystems announced earlier this month will survive the merger, as will all standing partnership agreements.

Terms of the acquisition were not disclosed. Checkpoint expects the transaction to be dilutive to earnings per share through 2009 and accretive thereafter.