Avery Rivals to Contest Suit Blocking Merger

Avery Dennison Corp. competitors, whose planned merger led to a federal investigation of the label industry, said Wednesday that they would take on the Justice Department in federal court in an effort to complete their deal.

The Justice Department filed a civil lawsuit last week in Chicago to block the $420-million acquisition of Morgan Adhesives Co. of Stow, Ohio, a unit of Minneapolis’ Bemis Corp., by Raflatac Inc. of Fletcher, N.C., which is part of the Finnish forest products company UPM-Kymmene Corp.

UPM, Bemis and Pasadena-based Avery all have said they have been told to expect subpoenas as part of a Justice Department criminal probe into competition in the market for label stock, the rolls of material from which finished labels are cut. UPM and Bemis said Wednesday that UPM will press ahead with its takeover bid by contesting the civil lawsuit, which is expected to go to trial in June.

“UPM believes strongly that the acquisition is pro-competition and pro-customers,” Bemis Chief Executive Jeffrey H. Curler said during a conference call with analysts.

A Justice Department spokeswoman declined to comment.

Avery is the leading provider of labels. According to the Justice Department lawsuit, Avery already held discussions with UPM about limiting “competitive frictions” in the market for rolls of its label material, and the government contends the companies could stop competing aggressively and jointly raise prices if the merger is completed.

Avery said it has frequent business discussions with UPM, which sells it $100 million in paper annually, but denied any improper conduct.

Avery shares rose $1.92 to $52.36 Wednesday on the New York Stock Exchange.