Avery Dennison Gains on Office-Division Sale: Los Angeles Mover

Avery Dennison Corp. closed at the highest price since July 2011 after reporting quarterly profit that beat analysts’ estimates and agreeing to a deal for its office products unit that 3M Co. scrapped a bid for in October.

Avery Dennison will sell the office products business and its label-converting unit to CCL Industries Inc. for $500 million in cash, according to a statement today. Separately, the Pasadena, California-based company reported fourth-quarter profit excluding some items of 54 cents a share, topping the 49-cent average of analysts’ estimates compiled by Bloomberg.

The deal with CCL Industries ends Avery Dennison’s search for a buyer for the office-products unit, which sells labels, binders and writing instruments with brands such as Hi-Liters and Marks-A-Lot markers. Avery Dennison said it will use the net proceeds from the sale for share repurchases and an additional pension contribution.

Avery Dennison “continues to deliver on their turnaround, supported by a strong operational focus and return of cash flow to shareholders,” Ghansham Panjabi, a Roseland, New Jersey-based analyst at Robert W. Baird & Co., wrote in a note today. The sale of the units may help buoy shares, said Panjabi, who rates the stock neutral, the equivalent of hold.

Avery Dennison surged 6.4 percent to $38.44 in New York, the highest level in more than 18 months. The shares rose 22 percent last year compared with a 13 percent gain for the Standard & Poor’s 500 Index.

Antitrust Concern

3M abandoned a $550 million offer for the office products business last year after the U.S. Justice Department opposed the transaction because of antitrust concerns. A takeover would have given St. Paul, Minnesota-based 3M more than 80 percent of the U.S. market for labels and sticky notes, the agency said.

The office product and label-converting divisions had combined revenue of about $910 million in 2012, Avery Dennison said. A syndicate of banks has committed to provide debt financing to complete the deal, Toronto-based CCL Industries said today in a separate statement.

The purchase is the largest transaction in CCL Industries’ history, Chief Executive Officer Geoffrey Martin said. The deal is expected to close by mid-2013 and add to earnings in 2014.

CCL Industries advanced 16 percent to C$53.25 in Toronto, the biggest jump since at least 1988. The shares rose 37 percent last year.

Avery Dennison’s sales for the fourth quarter rose 5.3 percent to $1.53 billion. Analysts projected $1.46 billion, on average.

Earnings in 2013 excluding restructuring costs and other items will be $2.40 to $2.80 a share, the company said. Analysts projected $2.40, on average.