Paxar/Avery Dennison Merger Update

The HSR notification for the Paxar(PXR) - Avery Dennison (AVY) merger was filed during the first week of this month. Assuming an April 5 submission date, the HSR waiting period will expire on or about May 7, 2007.

With respect to the FTC review, there continues to be absolutely little reason to expect a second request (or re-filing) despite some product overlap.

Further research into the segments identified below have uncovered no specific market share data, yet no indication from any source that the companies can be considered dominant players in any niche. The most commonly used description for the label printing market is undoubtedly 'fragmented'.

PS Nonwovens Stock 3 Sigma Corp. 3M Converter Markets Acucote Incorporated Advanced Coating & Converting Avery Dennison Printer Systems Avery Dennison, Fasson Roll Azcoat Inc. Can-Do National Tape Clear Cast Technologies Inc. Dunmore Corporation DuPont Tyvek Dynic USA Griff Paper & Film Intercoat Lamart Corp. MACtac (Morgan Adhesives Company) NAStar Novelprint P.I.C. Industries Inc. Paper Resources Inc. Paxar Corporation Polykote Corp. Polyonics Inc. Quicklabel Systems Rayven Inc. Roll Cover Italiana Spinnaker Coating LLC Weber Marking Systems Inc.	PS Paper Stock 3 Sigma Corp. 3M Converter Markets Acucote Incorporated Advanced Coating & Converting Systems Appleton Avery Dennison Printer Systems Avery Dennison, Fasson Roll Azcoat Inc. Boise Paper Brady Worldwide Can-Do National Tape Cham-Tenero Paper Mills Inc. Channeled Resources Group Griff Paper & Film Lamart Corp. MACtac (Morgan Adhesives Company) NAStar Novelprint Sistemas d P.I.C. Industries Inc. Paper Resources Inc. Paxar Corporation Plastiprint Inc. Polykote Corp. Quicklabel Systems Rayven Inc. Spinnaker Coating LLC Stora Enso Technicote Inc. Thilmany LLC UPM Raflatac Inc. Wausau Coated Products Inc. Weber Marking Systems Inc.
PS Nonwovens Stock 3 Sigma Corp. 3M Converter Markets Acucote Incorporated Advanced Coating & Converting Systems Appleton Avery Dennison Printer Systems Avery Dennison, Fasson Roll Azcoat Inc. Can-Do National Tape Channeled Resources Group CleaningCard.com Clear Cast Technologies Inc. Dunmore Corporation Dynic USA Corporation FLEXcon Green Bay Packaging Inc. Griff Paper & Film Intercoat Lamart Corp. MACtac (Morgan Adhesives Company) Mark Products Matan Digital Printers NAStar Novelprint Sistemas P.I.C. Industries Inc. Paper Resources Inc. Paxar Corporation Polykote Corp. Quicklabel Systems Ritrama Roll Cover Italiana Spinnaker Coating LLC STA Overlaminations Stora Enso Speciality Papers Technicote Inc. UPM Raflatac Inc. Wausau Coated Products Inc. Weber Marking Systems Inc.	Coated Tag Stock Acucote Incorporated Appleton Avery Dennison Printer Systems Avery Dennison, Fasson Roll Azcoat Inc. CBC Coating Channeled Resources Clear Cast Technologies Contract Converting LLC Dunmore Corporation Dynic USA FLEXcon Glatfelter Graphics One Inc. Griff Paper & Film Hanita Coatings Hazen Paper Co. Hutchison Miller Sales Co. Kanzaki Specialty Papers Klockner Pentaplast Lamart Matthias Paper Corp. Miami Wabash NAStar Neenah Paper Inc. Novelprint Sistemas P.I.C. Industries Paper Resources Paxar Corporation Performance Plastics Plastic Suppliers Inc. Polykote Polyonics Saint-Gobain Spinnaker Coating Stora Enso Speciality Papers Technicote UPM Raflatac Valeron Strength Films Weber Marking Systems Inc.
Uncoated Tag Stock Acucote Incorporated Avery Dennison Printer Systems Avery Dennison, Fasson Roll Azcoat Inc. Channeled Resources Group Clear Cast Technologies Inc Contract Converting LLC DuPont Tyvek Glatfelter Granwell Products Inc. Graphics One Inc. Griff Paper & Film Klockner Pentaplast Miami Wabash NAStar Novelprint Sistemas P.I.C. Industries Inc. Paper Resources Inc. Paxar Corporation Phoenix Films Inc. Plastic Suppliers Inc. Polykote Corp. Polyonics Inc. Spinnaker Coating LLC Technicote Inc. Transilwrap of Canada Ltd. Valeron Strength Films Weber Marking Systems Inc.	Bar Code Printers AB Graphic International Atlantic Zeiser Avery Dennison Printer Systems Bell-Mark CleaningCard.com Digital Print Inc. Domino Amjet Inc. Drent Goebel North America Jetrion LLC Label Vision Systems Inc. Novaflow Systems, Inc. Paxar Corporation Primera Technology Inc. Printing Technology Services Inc. Printronix Quality Discount Press Parts & Equipment, Inc. Quicklabel Systems RSI ID Technologies Sato Europe NV Seagull Scientific Inc. Sinel Systems SA Tharo Systems, Inc. Videojet Technologies Inc. Weber Marking Systems Inc. XSYS Supplies
Thermal Transfer Printers AB Graphic International Avery Dennison Printer Systems Bell-Mark Cartes Equipment Srl CleaningCard.com Drent Goebel Elmark Packaging Label Vision Systems Matan Digital Printers Newfoil Machines Paxar Corporation Printronix Quality Discount Press Parts Quicklabel Systems RSI ID Technologies Sato Europe NV Seagull Scientific Inc. Sinel Systems SA Tharo Systems, Inc. Videojet Technologies Weber Marking Systems XSYS Supplies	Variable Data Printers AB Graphic International Aquaflex Atlantic Zeiser Avery Dennison Printer Systems Bell-Mark Digital Print Inc. Domino Amjet Inc. Drent Goebel Eastman Kodak Company Elmark Packaging Inc. Jetrion LLC Matan Digital Printers Paxar Corporation Printing Technology Services Printronix Quicklabel Systems Seagull Scientific Inc. Sinel Systems SA Tharo Systems, Inc. Videojet Technologies Weber Marking Systems Inc.

 

According to the companies themselves, the market is described as follows:

Our opinion is that we've got less than a 10% share with both companies together and this has been a very -- we've done a very extensive review, the markets in which we deal.

There is a lot of competition out there. There is at least five or six companies that compete with us on a global basis and there is -- I would put it in the probably the thousands. It's in at least the high hundreds of regional competitors all over the world that we compete with."

Again, no reliable market share data has been found to confirm or contradict the companies' estimates -- this applies to every niche in which an overlap has been found. There simply does not appear to be any recent reliable data for this products available at the moment. While this can be considered somewhat of an issue, there continues to be absolutely no indication of a competition problem here. (An example of this concept can be found in this list of RFID competitors).

In years past, this type of deal (i.e. multiple overlaps, complex products, lack of data) might be a strong candidate for an "educational" second request. The fact of the matter is that the current FTC has shown little interest in issuing second requests for the purpose of obtaining clarity or gathering data on a specific market.

In sum, the information obtained to this point strongly suggest that the FTC will have no interest in the combination and will most likely allow the waiting period to expire in the standard 30 days. It would be remiss to completely ignore the possibility of some delay based on the factors listed above, so the possibility of an HSR withdrawal/refiling must be acknowledged. The chances of this occurring are perceived to be less than 20%.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.