The agreement between
Avery Dennison Corporation
) related to the sale of Office and Consumer Products business has
been called off. The reason for the termination of the deal has not
been divulged by either of the companies. However, Avery confirmed
that it will continue to search for a prospective buyer for its
Earlier in September, both the companies had clarified that the
agreement was still on despite a news release from the U.S.
Department of Justice (DOJ) declaring the abandonment of the deal.
The DOJ had informed the companies that it would file a civil
antitrust lawsuit to block the deal. According to the DOJ, the
proposed merger will give 3M Co. more than an 80% share of both the
U.S. labels and sticky notes markets and result in reduced
competition in the labels and sticky notes market. This would in
turn lead to higher prices and reduced innovation for products that
millions of American consumers use every day.
Avery Dennison's Office and Consumer Products unit manufactures
and sells a wide range of office and printable media products under
the Avery Dennison brand. The company had long held a strong
position in the labels business. 3M Co. sold sticky notes under its
In 2009, 3M entered into the labels market, intensifying the
competition for Avery Dennison. In retaliation, Avery Dennison
lowered wholesale prices, increased promotions and customer rebates
and accelerated innovations in labels. Avery Dennison also started
selling its own brand of sticky notes.
However, the business was affected due to weak end-market demand
and increased competition. Increased investment in demand creation,
consumer promotions, and innovation, as well as lower volume
hampered margins. Consequently, in December 2011, Avery agreed to
sell its Office and Consumer Products Group, for approximately $550
million to 3M Co.
Avery's decision to sell the underperforming Office and Consumer
Products business is a wise move. Avery has initiated its second
phase of restructuring initiative that is expected to be completed
by mid-2013 and reduce costs across all of its segments. More than
$100 million in annualized savings is estimated from this program.
Further share repurchases and dividend hikes could fundamentally
improve investor sentiment. Avery generates one third of its
revenue from Europe and given the weak demand in the region, we
maintain a cautious stance. Furthermore, rising raw materials
prices, negative currency translation remain headwinds. Shares of
Avery currently retain a Zacks #4 Rank (short-term Sell
St. Paul, Minnesota-based 3M Company, together with its
subsidiaries, operates as a diversified technology company with
manufacturing operations spread over 60 countries worldwide. It has
more than 35 business units organized into six segments: Consumer
and Office, Display and Graphics, Electro and Communications,
Healthcare, Industrial and Transportation, and Safety, Security and
Protection Services Business.
Pasadena, California-based Avery Dennison produces
pressure-sensitive materials, office products and a variety of
tickets, tags, labels and other converted products. Avery is a
Fortune 500 company operating over 200 manufacturing and
distribution facilities with roughly 32,000 employees in more than
60 countries. It competes with
Bemis Company Inc.
ACCO Brands Corporation
) and 3M Co.
ACCO BRANDS CP (ACCO): Free Stock Analysis
AVERY DENNISON (AVY): Free Stock Analysis
BEMIS (BMS): Free Stock Analysis Report
3M CO (MMM): Free Stock Analysis Report
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