Avery Acquires Stomp’s Line of CD, DVD Labels
Avery Dennison Corp. has acquired a line of compact disc and DVD labels from Costa Mesa-based Stomp Inc. in a transaction that makes the label-making giant the No. 1 manufacturer of the niche products.
Analysts expect the CD and DVD label segment to grow 10% or more in each of the next three to five years.
“Even with legal actions against Napster, we will see strong growth in the segment,” said Robert Bartels, an analyst for William Blair & Co. in Chicago. “A lot of people are downloading music over the Internet now. More and more people are doing digital photography. And just as people are downloading music on CDs, they are also downloading movies onto DVDs.”
Pasadena-based Avery, the global leader in adhesive labels ranging from self-adhesive postage stamps to office name tags, acquired the assets and intellectual property of Stomp’s CD Stomper line of CD and DVD labels Monday. Privately held Stomp manufactures software and computer accessories.
Terms of the transaction were not disclosed.
The acquisition is the first of its kind for Avery Dennison, although the company rolled out its own CD and DVD labels in 1998 because it saw the segment’s potential growth.
“We already have a presence in it,” said Avery spokesman Charles Coleman. “So we saw this acquisition as a real business growth opportunity.”
Stomp had sales of about $20 million in 2000, and Avery expects to see revenue grow this year by at least that much, Coleman said.
Avery will probably see about a 1% increase in annual sales and 1 cent to 2 cents added to earnings per share, said analyst James Ayscue of PNC Advisors in Philadelphia.
“It’s a pretty small increase in the big scheme of things,” Bartels said. “However, it’s indicative of what the company is trying to do, which is making acquisitions in niche groups with higher growth rates.”
Avery’s revenue in 2000 grew more than 7% before the effect of currency exchange rates.
Avery said it will continue to sell its Avery brand of CD and DVD labels and will retain the CD Stomper product line, which is sold in consumer electronics stores such as Best Buy. As part of deal, Avery also purchased Stomp’s label applicator.
“We’ve taken CD Stomper as far as we can,” Stomp spokesman Steve DiGerlando said. “Now, we’re handing it off to a Fortune 500 company that can take it to the next level.” The 70 Stomp employees involved in the CD Stomper line will be assigned to other projects, he said.
Shares of Avery, which has 18,000 employees worldwide, rose $1.37 to close at $54.64 on the New York Stock Exchange.
