UPDATE 1-3M scraps deal for Avery-Dennison's office products

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Oct 3 (Reuters) - Diversified manufacturer 3M Co on Wednesday terminated its $550 million deal to buy Avery-Dennison Corp's office and consumer products business.

The U.S. Justice Department had in September threatened a lawsuit to block the deal, saying it would result in higher prices and reduced innovation for consumers.

The sale would have been left Avery without its brand or the sales and distribution system necessary to compete in the sticky-notes market, the Justice Department said.

The proposed deal, announced in January, was to bring together two well-known consumer product families including 3M's Post-It notes and Avery's HI-LITERS markers.

Separately, Avery said it will continue to pursue a sale of the business.

Avery shares were down 7.8 percent after the bell. They closed at $31.45 on the New York Stock Exchange on Wednesday.

3M shares closed at $93.78 on the same exchange.

(Reporting by Mridhula Raghavan in Bangalore; Editing by Sriraj Kalluvila)

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