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Avery Dennison to Acquire Paxar for $1.3b

Late last week $5.5 billion labeling giant Avery Dennison announced a definitive agreement to acquire Paxar, a provider of identification solutions to the worldwide retail and apparel industry. Both companies are active in the retail and manufacturing market for RFID. The purchase price is approximately $1.34 billion.
Mar 26, 2007This article was originally published by RFID Update.

March 26, 2007—Late last week $5.5 billion labeling giant Avery Dennison announced a definitive agreement to acquire Paxar, a provider of identification solutions to the worldwide retail and apparel industry. Valued at approximately $1.34 billion, the purchase price translates to $30.50 per share of Paxar stock, a 27 percent premium over its $24.03 closing price on Thursday, the day of the announcement.

Avery Dennison highlighted three leading benefits to the acquisition, which the company has asserted is "a perfect fit". First, the incorporation of Paxar will facilitate Avery Dennison's growth in geographies like southern Asia and Europe where Paxar has a strong presence. Second, synergies resulting from the combined corporation will yield annualized cost savings in the neighborhood of $90 to $100 million within 24 months. Lastly, accretion to earnings per share (EPS) from the acquisition is expected within 12 months.

From this industry's perspective, notably absent is significant mention of RFID technology. Both Avery Dennison and Paxar are active in the RFID market -- Avery Dennison as an inlay producer, and Paxar as a printer/encoder manufacturer and label converter. Buried within the presentation slides used during the conference call is a single nod to RFID, which reads that the acquisition "strengthens capabilities in the rapidly growing apparel item-level RFID segment."

Likely the relatively minor mention of the RFID opportunity is because the technology has so far produced only modest revenues for both companies, immaterial in the face of a billion-dollar-plus price tag. Still, it stands in stark contrast to Motorola's $3.9 billion acquisition of Symbol last September, when analysts concluded that a strong foothold in the RFID marketplace was one of the leading long-term assets Symbol brought to the table.

Furthermore, Paxar recently started to receive some attention from investors who perceived the company's stock could be a good RFID investment vehicle. Investor site The Motley Fool covered Paxar and its RFID business in a recent article entitled What's the Frequency, Paxar? According to the article, "[RFID] still represents a small part of the company's business -- just $11 million in 2006 -- but [Paxar] plans to cleave it to the business like a heat-transferred label to a shirt."

With Paxar and Symbol no longer independent, the field of public companies whose stocks investors might use as RFID investment vehicles has grown even smaller. Zebra and Intermec are the remaining two most commonly cited. Both firms have seen their CEOs step down in the last six months (Zebra in September, Intermec just last week). Investment firm Raymond James noted that investors should watch closely who Intermec names as the existing CEO's successor; if the company promotes from within its own ranks, it could be an indication that Intermec is up for sale.

Read the acquisition announcement
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