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3M to buy Avery Dennison's office and consumer products unit

3M, the maker of Post-It notes, will pay $550 million for the office and consumer products division of Pasadena-based Avery Dennison. The unit made up 13% of the firm's sales last quarter.

January 04, 2012|By Tiffany Hsu, Los Angeles Times

It's one of those matches created in office-supply heaven: The maker of the Post-It note is buying the maker of the Hi-Liter.

Pasadena company Avery Dennison Corp. has agreed to sell its office and consumer products business to Minnesota-based 3M Co. for $550 million.

After the proposed deal closes, Avery Dennison will forge ahead without its consumer and office products operation, which accounts for about 13% of the company's overall sales in the most recent quarter. And 3M, a conglomerate with well-known products including Post-It notes and Scotch tape, will sell binders, labels, filing and indexing products, writing instruments and more to consumers under Avery's name.

The segment was a small and struggling one for Avery as customers scaled back and competition heated up at other brands.

The company is expecting fiscal 2011 revenue of $765 million for the office and consumer products branch, a 6% drop from 2010. The unit's annual earnings will be about $95 million before interest and taxes and other factors, Avery said.

The deal is expected to close in the second half of 2012. Avery said Tuesday that it would use proceeds from the sale to cut debt, contribute to pensions and buy back shares.

Avery's largest business is the manufacturing of pressure-sensitive materials, which include labels for foods, beverages and auto interiors. Its retail branding and information solutions arm produces garment tags and other services.

The company has tried to launch new products, control expenses and boost productivity as it has worked to rise above weak demand in 2011, Chief Executive Dean Scarborough said while releasing fiscal third-quarter financial results in October.

In 2011, Avery paired with Martha Stewart Living Omnimedia and Staples Inc. to create a home office product line. The company also partnered with Proteus Biomedical Inc. to make sensor-filled patches for healthcare use.

But while the company's third-quarter sales ticked up 3.6% to $1.7 billion, earnings plunged 22% to $49.8 million. In the quarter, the Brea-based office and consumer products business slipped more than 4% to $219.7 million in sales.

The segment's production facilities are scattered around the U.S. — though not in California — as well as in Europe and Australia. The unit's 3,000 employees will become 3M staffers, though "it's very early in the process … and it's too early to say what the impact will be," Avery spokesman David Frail said.

Avery shares rose 2.2%, or 63 cents, to $29.31. The company's stock started 2011 hovering around $40 a share, where it stayed for months before falling in late summer and remaining under $30 for the rest of the year.

In the third quarter that ended Oct. 25, 3M's sales were up 9.6% to $7.5 billion, while earnings slipped 1.6% to $1.1 billion. The company's consumer and office segment, which also includes products such as bandages, sponges and art-hanging hooks, jumped 4.6% to $1.1 billion in sales.

3M shares rose $1.76, or 2.2%, to $83.49.

tiffany.hsu@latimes.com

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