Ball Corporation's Rexam Acquisition Approved In Brazil

Ball Corporation (NYSE:BLL) confirmed that it has won the approval of Brazilian regulators, the Conselho Administrativo de Defesa Econômica (CADE), thus moving a step ahead in its attempt to acquire Rexam plc (OTC:REXMY) .

Ball Corporation is working to obtain the remaining regulatory approvals in Europe and the United States. The proposed acquisition will close on the receipt of these approvals. Following closing of the transaction, Ball Corporation will remain a New York Stock Exchange listed company domiciled in the U.S.

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

Rexam and Ball Corporation are the first and second largest beverage can manufacturers in the EEA respectively as well as market leaders worldwide. Ball Corporation was facing hurdles from its shareholders and regulatory bodies due to concerns that the buyout will impede effective competition in the consumer packaging market.

The European Commission 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. Can-Pack Group and Crown Holdings Inc. (NYSE:CCK) are the only remaining major players in Europe which would not have created sufficient competitive pressure on the merged entity.

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. Per the conditions, Ball Corporation will have to divest 8 of its existing European metal beverage can manufacturing plants and 2 end plants, along with 2 of Rexam's metal beverage can manufacturing plants. The European Commission also requires Ball Corporation to dispose certain European innovation and support functions in Bonn, Germany, Chester, U.K. and Zurich, Switzerland.

In addition, Ball Corporation plans to move its European regional support office to Rexam's Luton, U.K., location and will retain Rexam's Tongwell, U.K., research and development center. The business to be divested will have a total manufacturing capacity of over 18 billion cans in the EEA.

Upon completion of the proposed offer for Rexam, the combined company will operate Rexam's remaining 13 European beverage can manufacturing plants and 2 end plants, as well as 3 Rexam can plants and 1 end plant in Russia, and Ball Corporation's Bierne, France, Belgrade, Serbia, and Lublin, Poland, manufacturing plants.

The buyout will allow Ball Corporation to further leverage, simplify and streamline its business in Brazil, as well as across the broader metal beverage business. The company expects to obtain the remaining regulatory clearances which will enable the proposed acquisition of Rexam to close during the first half of 2016.

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


BALL CORP (BLL): Free Stock Analysis Report

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REXAM PLC-ADR (REXMY): Free Stock Analysis Report

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