Ball Offers To Acquire Rexam In $8.4 Bln Deal
Ball Corp. (BLL) Thursday offered to acquire beverages-can maker Rexam Plc. in a cash and stock deal valued at 5.4 billion pounds or $8.4 billion, including the assumption of net debt. Rexam's shares added over 4 percent in early trade in London.
The transaction is projected to have $300 million of achievable synergies by 2018, and is expected to be highly accretive to earnings per share.
Ball provides metal packaging products to the beverage, food, personal care, and household products industries. According to the companies, they have complementary metal beverage packaging product offerings and strong cultural compatibility. The combined company will have pro forma 2014 revenue of about $15 billion and around 22,500 employees across five continents.
John Hayes, chairman, president and CEO of Ball, said, "As our customers' global reach and product portfolios expand and consumer packaging preferences evolve, the Ball and Rexam combination allows us to remain competitive versus other packaging substrates and responsive to our stakeholders needs for sustainable, innovative and low-cost packaging solutions."
Under the terms, for each Rexam share, Rexam shareholders will receive 407 pence in cash and 0.04568 new Ball shares.
The transaction values Rexam at 610 pence per share based on Ball's 90-day volume weighted average price as of February 17, 2015, and an exchange rate of $1.54: £1 on that date. This represents an equity value of 4.3 billion pounds or $6.6 billion.
The offer marks a premium of 36 percent over Rexam's closing price on February 4, the last trading day prior to media speculation concerning a potential transaction.
Upon completion of the transaction, Rexam shareholders will own around 19 percent of Ball's shares outstanding.
Boards of directors of both companies unanimously support the transaction. In addition, Ball will provide a Mix and Match Facility, which will allow Rexam shareholders to elect, subject to offsetting elections, to vary the proportions in which they receive new Ball shares and cash.
It is expected that the necessary clearances for the transaction will be obtained in the first half of 2016. Following closing of the transaction, Ball will remain a New York Stock Exchange listed company domiciled in the U.S.
Ball believes that its existing strong free cash flow coupled with the free cash flow of Rexam will allow the combination to aggressively pay down debt after closing, as has been done following the previous acquisitions such as Reynolds Metals in 1998, Schmalbach-Lubeca in 2002, U.S. Can in 2006 and the AB InBev plants acquisition in 2009.
Given the cash generative capabilities and the $300 million of annual run-rate synergies of today's proposed transaction, we expect to maintain a solid credit profile after this transaction is complete...Once we have reduced the leverage to levels in the range of 3.0 times net debt to EBITDA, the company will re-initiate its share repurchase program, and we are targeting 2018 for that," said Scott Morrison, Ball's CFO.
Separately, Rexam reported full year results today. Profit before tax rose to 343 million pounds from 339 million pounds in the previous year. Underlying profit before tax was 360 million pounds, compared to 372 million pounds.
Earnings per share from continuing operations was 35.9 pence, compared to 31.6 pence in the previous year.
Sales from continuing operations decreased to 3.83 billion pounds from 3.94 billion pounds. Organic sales, which adjust for the impact of foreign currency translation, grew 4 percent, broadly in line with the company's volume growth.
For 2014, the group intends to pay a final dividend of 11.9 pence on May 27, to shareholders on the register on May 1.
BLL closed up 3.7 percent on Wednesday at $77.16. REX.L added 4.2 percent in early trade to 559.50 pence.(dpa)
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