3M Company (MMM) signed a definitive agreement with Avery Dennison Corp. to acquire its Office and Consumer Products business (“OCP”) for $550 million in cash. The closing of the transaction is subject to certain regulations.

Avery Dennison’s Office and Consumer Products business leads the worldwide market as a provider of office and education products, including labels, binders, presentation products, filing and indexing products, writing instruments, and other office and home organization products. OCP also supplies Avery(R), HI-LITERS(R), and Marks-A-Lot(R) brands in the U.S., Canada, Germany, France, United Kingdom, Australia, New Zealand, and several other countries.

Headquartered in Brea, Calif., OCP employs about 3000 people globally. The 2011 sales are projected to be $765 million with EBITDA of $95 million. The transaction is expected to be completed in the second half of 2012

3M’s business and presence in worldwide market will be expanded through the inclusion of OCP business. Together the company will be able to better satisfy its retailers and customers as the combined business will continue to invest in product innovation, category management and business and supply chain analytics to provide superior products and shopping experiences.

According to 3M’s estimate, the acquisition will be $0.06 dilutive to GAAP earnings per share in the first 12 months after the closure of the acquisition. Without purchase accounting adjustments and expected integration expenses, the acquisition is expected to be $0.03 accretive to earnings over the same period.

3M Company together with its subsidiaries operates as a diversified technology company with manufacturing operations spread over 60 countries worldwide. It has more than 35 business units organized into six segments: Consumer and Office, Display and Graphics, Electro and Communications, Healthcare, Industrial and Transportation, Safety, Security and Protection Services Business. The major competitors of 3M are Avery Dennison Corporation (AVY), EI DuPont de Nemours & Co. (DD) and Johnson & Johnson (JNJ).

We continue to maintain a Neutral rating on 3M Company for the long term and a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

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