3M Co. (MMM)’s $550 million takeover of Avery Dennison Corp.’s office-products unit will face a lawsuit by the U.S. Justice Department if the companies don’t abandon the transaction, said a person with knowledge of the process.
The agency could move to block the deal as soon as the end of this week, said two people, who asked not to be named as the matter is confidential. The deal would combine the two largest label makers in the world, according to Deane Dray, an analyst at Citigroup Inc. in New York.
3M, which announced the acquisition more than eight months ago, had planned to complete the purchase in the second half of this year. Charles Miller, a Justice Department spokesman, declined to comment on whether the agency is planning to file a lawsuit seeking to block the deal. Donna Fleming Runyon, a spokeswoman for 3M, and David Frail, a spokesman for Avery Dennison, didn’t immediately respond to requests for comment.
“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.
Avery Dennison fell 5.2 percent to $29.60 at the close of New York trading after earlier sinking as much as 7.4 percent. 3M declined 1 percent to $91.68.
The transaction would be 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 Post-it Notes and Scotch tape.
3M became the biggest global player in the label market after Avery Dennison when 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.