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New 3M CEO Inge Thulin spoke during the annual shareholders meeting on May 8, 2012, in St. Paul.

Bruce Bisping, Star Tribune

What analysts are saying: 3M's sticky situation

  • September 15, 2012 - 4:45 PM

3M Co.'s $550 million bid for the office and consumer products operations of Avery Dennison, initially announced in January, appears to have ground to a halt on Sept. 5 after the U.S. Department of Justice threatened to file a civil antitrust suit. The Justice Department objected to the fact that a post-merger 3M would control 80 percent of the market for labels and sticky notes.

Within hours of the Justice Department's announcement, both companies vowed that they would find an agreeable way to make the deal work.

But Brian Langenberg, an analyst for Langenberg & Co., remains skeptical. In late July, he'd downgraded his recommendation on 3M to ''hold." Now the prospects of a greatly diminished deal further confirmed his earlier move. In a Sept. 7 research note, Langenberg wrote: "Though 3M and Avery Dennison are attempting to find a workaround, we think any 'rump' deal might be significantly smaller than envisioned and far from likely."

DEVICE TAX = JOB CUTS

St. Jude Medical's recent restructuring announcement that will cut 300 jobs at the Little Canada-based maker of medical devices comes just ahead of a pending 2.3 percent excise tax on domestic sales of any taxable medical device. The company claims the moves are not related.

Analysts told Star Tribune columnist Lee Schafer the cuts would neatly offset the impact of the device tax. Thomas Gunderson, a senior research analyst at Piper Jaffray & Co., concluded the timing of the restructuring was in response to the device tax.

"It just seemed too big of a coincidence not to include the excise tax as a contributing factor," Gunderson told the Star Tribune.

PATRICK KENNEDY

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