Avery Dennison to sell office supplies business, shares rise
By Bhaswati Mukhopadhyay
(Reuters) - Avery Dennison Corp (AVY.N: Quote) said it would sell its consumer and office supplies unit, which includes Avery labels and Hi-Liters markers, and its coated films business to Canada's CCL Industries Inc (CCLb.TO: Quote) (CCLa.TO: Quote) for $500 million.
Avery shares rose as much as 11 percent to a 19-month high of $40.00 on the New York Stock Exchange, while CCL jumped 16 percent to a life-high of C$53.25 on the Toronto Stock Exchange.
The sale comes three months after 3M Co (MMM.N: Quote) dropped its $550 million offer to buy Avery's office and consumer products business following anti-trust concerns.
"Avery is certainly selling this business for less than what it was supposed to sell it to 3M for. We expected that to happen, but we didn't expect them to package another business along with it," Morningstar analyst Todd Wenning said.
Sales of office supplies have taken a hit as businesses and governments cut spending in a weak economy. Margins have also suffered with rising raw material costs.
Wenning, however, added the sale would allow Avery to focus on its pressure-sensitive materials and retail branding businesses.
The pressure-sensitive materials business, which makes label and packaging materials for food and beverages, accounted for about 70 percent of the company's 2012 revenue of $6 billion.
Avery expects to use proceeds from the sale to repurchase shares and make an additional pension contribution. The company spent $235 million on share buybacks in 2012, reducing its outstanding shares by 7 percent. Continued...