Ball Corp agrees $6.9bn Rexam deal

April 2015 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

US drinks can manufacturer Ball Corporation has agreed to acquire British rival Rexam Plc in a deal worth around $6.9bn, or $8.4bn including the assumption of pre-existing debt.

The deal, announced in late February, will see Ball pay around $6.27 in cash and 0.04568 new Ball shares for each Rexam share held. The purchase price represents a 40 percent premium over Rexam’s closing price on 4 February, the last day of trading before speculation of a takeover began, and a 17 percent premium on the firm’s closing price on Wednesday 18 February, the day before the deal was announced.

According to a joint statement released by the two firms, the transaction is still subject to the approval of both company’s shareholders, we well as regulatory approval. Provided regulatory consent is forthcoming, the transaction is expected to close in the first half of 2016.

Under the terms of the deal, Ball is able to walk away from the deal if the firm is required to divest assets that generate sales of more than $1.58bn; however, the company would be required to pay a break fee of about £300m, roughly 7 percent of the total deal value. In the event that divestures are required, Ball and Rexam’s US based rival Crown, the third-largest beverage can maker, may be the main beneficiaries of any asset sales.” The combination of Ball and Rexam creates a global metal beverage packaging supplier capable of leveraging its geographic presence, innovative products and talented employees to better serve customers of all sizes across the globe; while at the same time generating significant shareholder value,” said John Hayes, the chairman, president and chief executive of Ball.

Once approved, the amalgamation of Ball and Rexam, both of which supply containers to beverage giants Coca-Cola Co. and Anheuser-Busch InBev NV, will create the world’s biggest consumer-packaging supplier. The new firm will control more than 60 percent of the consumer packaging market in North America, Europe and Brazil. Accordingly, some commentators have suggested that antitrust concerns may derail the deal. While Ball is particularly strong in South East Asia and China, Rexam is strongly placed in Russia and northern Europe, so the firms are confident that regulatory approval will be forthcoming.

The deal will see Rexam shareholders owning 19 percent of the newly merged firm, whereas Ball’s shareholders will retain the remaining 81 percent. The firm will be domiciled in the US and listed on the New York Stock Exchange. Ball has opted to eschew the opportunity to invert and relocate to the UK as many other US firms have done over the last 12 or so months. Stuart Chambers, chairman of Rexam, said in a statement, “The Rexam board believes that the proposed combination with Ball is a compelling opportunity for our stakeholders. By combining the two companies, we will create a truly global platform to deliver best-in-class service to customers based on a shared culture of manufacturing excellence and continued innovation. The proposed transaction offers our shareholders an attractive premium and an opportunity to participate in the value creation of the combined group through ownership of Ball shares.”

The newly combined Ball will employ approximately 22,500 people, generate around $15bn in sales, and release approximately $300m of synergies by 2018. The merger will see the new Ball able to make savings in a number of areas including warehousing and transport costs. The transaction, Ball noted, will be financed via a bridging loan of £3.3bn, a $3bn credit facility and the issuance of $2.2bn of new equity.

Richard Summerfield