Photographer: Chris Ratcliffe/Bloomberg

Ball Agrees to Buy Rexam, Creating Largest Can Maker

Ball Corp. agreed to buy Rexam Plc for about 4.4 billion pounds ($6.8 billion) in cash and stock to create the world’s biggest maker of food and beverage cans.

The deal is conditional on European Union and U.S. regulators not requiring “material divestitures,” Broomfield, Colorado-based Ball said in a statement on Thursday. Its offer is valued at 628 pence, while Rexam traded at 565 pence at 3:45 p.m. in London.

“It is yet to be seen as to whether the deal will pass regulatory scrutiny,” said Philip Barker, a partner at Cavendish Corporate Finance, a London-based mergers and acquisitions advisory firm. Should the deal proceed, it “will create a powerful and truly global player in the drinks-can market as the two largest companies in the market join forces.”

The Ball-Rexam tie-up is the biggest takeover in metal and glass packaging, according to data compiled by Bloomberg. It’s also the latest big deal in the packaging industry this year. Rock-Tenn Co., a paperboard producer that is North America’s second-biggest packaging company, announced a $9.4 billion merger with MeadWestvaco Corp. last month.

Both Ball and London-based Rexam supply beverage containers to Coca-Cola Co. and brewer Anheuser-Busch InBev NV, according to data compiled by Bloomberg. The combined company will have about 22,500 employees and $15 billion in sales and create $300 million in annual cost savings, according to Ball.

Rexam, which plans to increase output in the Middle East, Central America and Southeast Asia, first said Feb. 5 that Ball had made an offer.

‘High Note’

“Our internal debate about whether there was any fight left in Rexam is settled,” said Sandy Morris, a London-based analyst at Jefferies Group LLC. “Rexam is, at least, going out on a high note.”

Ball will pay 407 pence plus 0.04568 of a new share for Rexam. The bid price is 17 percent higher than Rexam’s closing price on Wednesday.

The U.S. company will finance the deal with a 3.3 billion-pound bridge loan, a $3 billion credit facility and the issue of $2.2 billion of new equity, it said in a slide presentation.

Ball will pay Rexam as much as 302 million pounds, or 7 percent of the deal value, if the transaction isn’t completed because regulatory conditions aren’t satisfied. Lower fees will apply if the sale falls through for other reasons.

The companies expect the takeover to be complete in the first half of 2016.

Shares of Ball dropped 2.4 percent to $75.32 in New York.

Ball was advised by Greenhill & Co., Deutsche Bank AG and Goldman Sachs Group Inc. Legal advisers included Skadden, Arps, Slate, Meagher & Flom LLP and Axinn, Veltrop and Harkrider LLP.

Rexam worked with Rothschild, Barclays Plc, Credit Suisse Group AG and Bank of America Merrill Lynch. Its legal adviser was Freshfields Bruckhaus Deringer LLP.

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