Avery Dennison to Acquire Paxar for $1.3 Billion or $30.50 Per Share

RIS provides brand identification and supply chain management solutions primarily for manufacturers and retailers, including tag and label design and printing; inventory and shipment tracking; and data management systems.

30/03/07 Avery Dennison Corporation and Paxar Corporation announced that their boards of directors have unanimously approved a definitive agreement for Avery Dennison to acquire all outstanding shares of Paxar for $30.50 per share in a cash transaction valued at approximately $1.34 billion. The transaction is expected to enhance Avery Dennison's ability to compete and grow in the fragmented, expanding $15 billion-plus global retail information and brand identification market.

"This combination is a terrific strategic fit," said Dean A. Scarborough, president and chief executive officer of Avery Dennison. "Paxar's highly complementary capabilities advance our strategy to deliver exceptional products and superior service to customers at every level of the global retail supply chain, and to increase efficiency and reduce costs in a rapidly changing and increasingly competitive global marketplace. In addition, this acquisition will allow us to invest in product innovation and services that will serve our existing customers even better."

Avery Dennison's Retail Information Services (RIS) business represents one of its fastest-growing units. RIS provides brand identification and supply chain management solutions primarily for manufacturers and retailers, including tag and label design and printing; inventory and shipment tracking; and data management systems.

"This combination will give us the capabilities, products and geographic reach to pursue new segments of the global retail information and brand identification market. These segments include retailers and manufacturers serving local customers in India and China," said Mr. Scarborough.

"Combining with Avery Dennison provides substantial benefits to our customers while delivering compelling value to Paxar shareholders," added Rob van der Merwe, chairman, president and chief executive officer of Paxar Corporation. "In particular, the broader capabilities of the combined Company will better meet customer demands for improved quality, product innovation and speed of delivery. Although we understand that some jobs will be affected through the integration of our businesses, employees of the combined Company will have expanded opportunities as part of a larger organization."

Customer Benefits

In this evolving marketplace, it is increasingly important to be close to the local manufacturing clusters, the two companies said. With their complementary geographic footprints, in particular with Paxar's greater focus on Europe, the acquisition improves the combined Company's ability to serve customers in Europe, Latin America, the Middle East and Asia.

"Lower-cost production - and higher levels of quality and speed of delivery - will be crucial for winning against the local and regional competition we face at the buying office and factory levels," said Mr. Scarborough. "This combination will benefit the factories that purchase our tickets and tags as well as the retailers and the brand owners they supply."

Financial Terms

Under the terms of the agreement, Avery Dennison will purchase each common share of Paxar for $30.50. Based upon Paxar's closing price of $24.03 on Thursday, March 22, 2007, this represents a premium of 27 percent. JPMorgan Chase Bank, N.A. has committed $1.35 billion in acquisition financing and will also arrange long-term financing.

Cost Savings/Accretion

Avery Dennison expects approximately $90 to $100 million in annual cost savings, with similar infrastructure enabling the elimination of redundant production costs and reductions in selling, general and administrative expenses, including corporate overhead and back office support. Avery Dennison currently estimates that there will be integration costs, including restructuring and asset impairment charges ranging from $100 to $125 million, plus information technology (IT) integration costs and other IT investments of at least $50 million. Excluding these costs, the transaction is expected to turn accretive to earnings per share within one year following the close of the transaction. Avery Dennison management has a successful track record of integrating international acquisitions and achieving significant cost synergies. Avery Dennison expects to realize its targeted savings within 24 months following the close of the transaction.

Integration

The two companies will develop an integration plan that retains the best systems and people from both organizations.
"While there will be a reduction in overlapping positions, employees will be part of a stronger, more rapidly growing global business," said Mr. Scarborough. "We plan on retaining top-notch talent to ensure that we are the best in the industry."

Closing Terms and Conditions

The transaction is expected to close by year-end and is subject to Paxar shareholder approval, as well as regulatory approvals in the U.S. and other countries.