Ball Corp's (BLL) Rexam Deal Gets EC Nod: Should You Buy?

After a long wait, Ball Corporation (NYSE:BLL) has confirmed that it has received the final regulatory clearance of the European Commission (EC) for its proposed acquisition of Rexam PLC. EC has formally approved the buyout in Europe.

Headquartered in London, Rexam is a leading metal beverage can maker with 55 plants in more than 20 countries. The company produces cans for The Coca-Cola Company (NYSE:KO) , Pepsico, Inc. (NYSE:PEP) and Anheuser-Busch InBev SA.

In early 2015, Ball Corporation had confirmed its offer to acquire Rexam. The acquisition of Rexam for a cash and stock deal valued at $8.4 billion (£5.4 billion) will create the world's largest consumer packaging supplier.

The merged company will be better positioned to serve the combined customer base through supply chain efficiency, manufacturing excellence and increased product innovation. However, Ball Corporation was facing challenges from its shareholders and regulatory bodies due to concerns that the buyout will impede effective competition in the consumer packaging market.

The EC opened an in-depth inquiry regarding this, to assess whether the proposed transaction will reduce competition in the beverage can and aluminum bottle manufacturing industry in the EEA. The investigation revealed that the transaction would have significantly reduced competition for customers.

In order to address the commission's concerns, Ball Corporation submitted commitments to divest 10 can body plants and 2 can end plants located within the EEA. The business to be divested will have a total manufacturing capacity of over 18 billion cans in the EEA.

On Jun 8, Ball Corporation won the approval of Brazilian regulators, the Conselho Administrativo de Defesa Econômica (CADE). Finally, the EC has sanctioned the acquisition. EC also formally approved Ardagh Group's proposed buyout of some of the Ball Corporation and Rexam PLC businesses.

The company is now working to obtain the remaining regulatory approvals in the U.S. Following the closing of the transaction, Ball Corporation will remain a New York Stock Exchange listed company domiciled in the U.S.

Currently, Ball Corporation has a Zacks Rank #3 (Hold). A better-ranked stock in the sector is Crown Holdings Inc. (NYSE:CCK) carrying a Zacks Rank #2 (Buy).


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