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Avery Dennison To Acquire Smartrac’s RFID Inlay Business for Approximately $250 Million

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Coresight Research

Key Points

On November 20, 2019, Avery Dennison announced it had signed a definitive agreement to acquire Smartrac’s Transponder (RFID Inlay) division for €225 million ($248 million). The acquisition is expected to close within a few months.

  • Smartrac’s Transponder division is a leader in the development and manufacture of RFID products and expects to generate 2019 global revenues of approximately $140 million.
  • The business complements Avery Dennison’s Intelligent Labels platform, expands its existing product portfolio, enhances the company’s R&D, manufacturing and sales capacity, and increases its RFID offerings.
  • It will also help Avery Dennison expand into a variety of end markets, reach customers in the industrial and retail segments, and expand into new channels.
  • The acquisition should increase Avery’s global scale and presence and increase its revenues by about 45% to $450 million annually. The company expects to fund the transaction with existing cash and credit facilities.

On November 20, 2019, Avery Dennison announced it had signed a definitive agreement to acquire Smartrac’s Transponder (RFID Inlay) division for €225 million ($248 million). The acquisition is expected to close within a few months.

Smartrac is based in Amsterdam, and has manufacturing facilities in Germany, Malaysia, China and the US.

Avery Dennison expects the acquisition to be immaterial to 2020 adjusted EPS (for which the consensus estimate is $7.08, up 8.3%).

The company said it expects to fund the transaction with existing cash and credit facilities, implying the company intends to acquire the business with cash.

 Our Take on the Acquisition

The acquisition should add technology, product breadth, manufacturing capacity, new customers and new sales channels, increasing the company’s global presence and revenues by about 45%.

Benefits for Avery Dennison

The acquisition is expected to provide the following benefits:

  • Complements Avery Dennison’s Intelligent Labels platform, expands its existing product portfolio, enhances the company’s R&D, manufacturing and sales capacity, and increases its RFID offerings.
  • Offers an expansion into a variety of end markets, customers in the industrial and retail segments, and access to new channels.
  • Creates a platform with over $450 million in revenue with long-term growth and profitability above the corporate average, plus strong research and development capabilities, expanded product lines and added manufacturing capacity.

The Smartrac Business

Smartrac’s Transponder (transmitter and receiver, or RFID inlay) division is a leader in the development and manufacture of RFID products and expects to generate 2019 global revenues of approximately €125 million (USD $140 million); it has approximately 900 employees. The relevant products include inlays and tags (for high frequency, near-field, ultrahigh frequency and sensors), as well as hard tags for near field, high frequency and ultrahigh frequency.

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