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Avery Dennison to Sell Office and Consumer Products Business to 3M

Monday, January 09, 2012

Press release from the issuing company

Avery Dennison Corporation (NYSE:AVY) today announced that it has signed a definitive agreement to sell its Office and Consumer Products business (“OCP”) to 3M Company(NYSE:MMM) for $550 million in cash. The transaction is subject to customary closing conditions and regulatory approvals.

“The sale of our Office and Consumer Products business to 3M presents the best opportunity to maximize OCP’s value for Avery Dennison’s shareholders, and complements 3M’s global portfolio,” said Dean A. Scarborough, Avery Dennison chairman, president and chief executive officer. “Our industry-leading Pressure-sensitive Materials and Retail Branding and Information Solutions businesses, combined with our strong balance sheet, make us well positioned for profitable growth and increased return of cash to shareholders.”

Avery Dennison intends to use the proceeds from the transaction primarily to reduce debt, make additional pension contributions, and repurchase shares. This transaction will not negatively impact the Company’s common stock dividend.

Avery Dennison’s Office and Consumer Products business is one of the world’s leading suppliers of printable media and other products, with expected sales in 2011 of approximately $765 million; and expected adjusted operating income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in 2011 of approximately $80 million and $95 million, respectively. These adjusted operating income and EBITDA estimates exclude allocations of general corporate overhead. To reduce costs, and in anticipation of an OCP transaction, Avery Dennison began implementing cost reduction actions as described in the Company’s third quarter 2011 Form 10-Q.

Avery Dennison Corporation’s pro forma sales in 2011, excluding OCP, are expected to be approximately $6 billion. All expectations herein of the performance of OCP and Avery Dennison are as of October 26, 2011, the date that the Company announced its third quarter 2011 results.

The transaction is expected to be completed in the second half of 2012.

J.P. Morgan Securities LLC advised Avery Dennison on the transaction. Latham & Watkins served as Avery Dennison’s legal counsel.

Non-GAAP Financial Measures

Adjusted Operating Income for OCP refers to segment operating income before interest, taxes, restructuring charges, general overhead allocations and transaction costs.

EBITDA for OCP refers to Adjusted Operating Income before depreciation and amortization.

Avery Dennison's pro forma sales refers to net sales excluding OCP sales, adjusted for the positive impact on net sales from the change from intercompany supply of pressure-sensitive materials to agreed-upon supply of such materials to 3M.

These non-GAAP financial measures are not in accordance with, nor are they a substitute for, the comparable GAAP financial measures. Non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP financial measures, may make it difficult to assess the transaction. By excluding certain accounting effects, both positive and negative, from certain of our GAAP financial measures, we believe that we are providing meaningful supplemental information to facilitate an understanding of the transaction. These non-GAAP financial measures are used internally to evaluate trends in our underlying business, as well as to facilitate comparison to the results of competitors for a single period. While some of the items we exclude from GAAP financial measures may recur, they tend to be disparate in amount, frequency, and timing.


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