Avery & 3M Deal Still On (AVY) (BMS) (MMM)

The DOJ had earlier 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 sale of labels and sticky notes. This would in turn lead to higher prices and reduced innovation for products that millions of American consumers use every day.

In light of concerns about the transaction raised by the DOJ, the companies have voluntarily withdrawn the notification and report forms filed regarding the transaction under the Hart-Scott-Rodino Act. The companies stated that together they will look for options to address the DOJ’s concerns, obtain regulatory approval, and complete the transaction.

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 name. The company had long held a strong position in the labels business. 3M Co. sold sticky notes under its Post-it Brand.

In 2009, 3M entered 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 segment’s results were affected due to weak end-market demand and increased competition. Increased investment in demand creation, consumer promotions, and innovation, as well as lower volume pressurized margins. Consequently, in December 2011, Avery agreed to sell its Office and Consumer Products Group, for approximately $550 million to 3M Co.

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 also competes with Bemis Company Inc. (BMS).

The shares of Avery Dennison are currently maintaining a Zacks #3 Rank (Hold) over the short term.