Tags: justice | antitrust | 3m | avery-dennison

3M Scuttles Avery Dennison Deal under US Pressure

Tuesday, 04 Sep 2012 08:49 PM

3M Co. dropped its $550 million takeover of Avery Dennison Corp.’s office-products unit after the U.S. Justice Department said it would sue if the companies didn’t abandon the transaction, the government said.

The Justice Department said in an e-mailed statement that its investigation found that 3M and Avery have dominated adjacent spaces in the office products business for many years, with Avery making labels and 3M selling sticky notes sold under its Post-it Brand.

The merger would have given 3M more than 80 percent of the U.S. market for labels and sticky notes, according to the statement.

“We welcome the companies’ decision to abandon this deal, which raised competitive concerns in the sale of labels and sticky notes,” Joseph Wayland, acting assistant attorney general for the Antitrust Division, said in a statement. “As a result of the abandonment of this transaction, American customers will continue to receive the benefits of competition including lower prices and greater innovation in these basic office supplies.”

3M, which announced the acquisition more than eight months ago, had planned to complete the purchase in the second half of this year.

Donna Fleming Runyon, a spokeswoman for 3M, and David Frail, a spokesman for Avery, didn’t immediately return phone and e-mail messages seeking comment on the Justice Department’s statement.

‘Overlap’

The deal would have combined the two largest label makers in the world, according to Deane Dray, an analyst at Citigroup Inc. in New York.

“Obviously they had overlap, I would’ve thought that they would’ve thought that through on both sides more fully,” said Ghansham Panjabi, a Roseland, New Jersey-based analyst at Robert W. Baird & Co.

Avery probably will bring the business “back into continuing operations and evaluate it some other time,” rather than seek another buyer right away, he said.

Shares of Avery, based in Pasadena, California, fell 5.2 percent to $29.60 at the close of New York trading after earlier sinking as much as 7.4 percent. 3M, based in St. Paul, Minnesota, declined 1 percent to $91.68.

The transaction would have been 3M’s biggest since the company paid $662.4 million to buy fingerprint-identification systems maker Cogent Inc. in 2010. Buying the division would allow 3M to add products such as Marks-A-Lot pens to a lineup of office goods that includes Scotch tape.

A-One Unit

3M became the second-biggest global player in the label market behind Avery Dennison after it completed the 2010 purchase of a majority stake in Japanese label maker A-One’s consumer and office label business, according to Citigroup’s Dray. A-One is the top office and consumer label brand in Asia, he said.

The proposed transaction is small for 3M, which makes products ranging from dental braces to commercial sealants, and its failure won’t “move the needle” in a negative way for the $63.4 billion company, Dray said Tuesday in a phone interview.

“It’s not that material to 3M,” he said. “The collection of products are very good quality, but they were more line extensions and gap-fillers rather than a pivotal part of the business model.”

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