Avery Dennison Corporation
) divested both its Office and Consumer Products (OCP) and
Designed and Engineered Solutions (DES) businesses to CCL
Industries Inc., a global leader in specialty packaging
solutions, for $500 million.
The transaction is subject to customary closing adjustments, but
it is expected to be finalized in the third quarter. The net sale
proceeds of approximately $400 million will be utilized to
repurchase shares and contribute toward an additional pension
Avery's Office and Consumer Products segment has been struggling
for a long time. The business was affected by weak end-market
demand and increased competition. Increased investment in demand
creation, consumer promotions and innovation, as well as lower
volume hampered margins. In Dec 2011, Avery had first entered
into an agreement to sell the segment for approximately $550
However, the deal was scrapped in October last year and Avery
continued to search for a prospective buyer for the business. In
Jan 2013, Avery agreed to divest the segment along with its
Designed and Engineered Solutions businesses to CCL Industries
With the divestiture of the weaker Office Products business,
Avery will be able to focus on its market-leading,
pressure-sensitive materials business and Retail Branding and
Information Solutions segment.
In order to attain its financial targets of double-digit earnings
growth and higher returns, Avery aggressively implemented a
restructuring program in the second quarter of 2012 to reduce
cost across all the business segments.
The program is anticipated to be completed by mid-2013. Avery
expects to save more than $100 million annually by leveraging
this program by mid-2013.
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Avery remains committed to its long-term targets (by 2015) of
sales growth in the range of 3% to 5% and net income growth of
10-15%. Earnings per share growth of 15-20% is expected to be
achieved through continued growth in emerging markets and
In addition, the company expects to generate free cash flow of
around $1.2 billion - $1.4 billion over the 2012-2015 timeframe
or $1.6 billion -$1.8 billion (including $400 million from the
abovementioned sale). This will be utilized toward - $150-300
million in debt repayment, more than $200 million for
acquisitions and $1-1.5 billion will be returned to shareholders
over the period in combined share buyback and dividends.
Avery currently retains a Zacks Rank #2 (Strong Buy). Other
stocks in the same industry with favorable Zacks rank are
CompX International Inc.
Herman Miller Inc.
), both carrying a Zacks Rank #2 (Buy).