Ball Corp to buy can maker Rexam for 4 4bn

The merger between the US and British drinks can makers would create an industry giant.

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By :  ,  Financial Analyst

US drinks can maker Ball Corp is to buy British rival Rexam Plc in a £4.43 billion deal, creating an industry giant, after Rexam agreed to the offer yesterday (February 19th).

Rexam said that the combined business would be more attractive to the world’s leading drinks companies, who could strike a single packaging deal to cover all markets, rather than enter separate negotiations with different companies to cover all regions.

Ball will also assume about £1 billion worth of Rexam’s debt. It is expected that by merging, the world's two largest beverage companies would be able to better manage capital spending and costs as aluminium premiums rise, according to Reuters. It would also help them reduce warehousing and transport costs.

Antitrust concerns

However, markets reacted rather negatively to the announcement, with shares of Rexam falling significantly below the indicated price of 628 pence per share yesterday. Ball shares fell about two per cent.

While analysts said the offer price was fair, they worried about antitrust concerns. "As there are so many regulatory approvals required for such a merger to go through, I think the market is discounting the probability of it happening," said Thomas Picherit of research firm AlphaValue, quoted by Reuters.

A combined company would control about 61 per cent of the market for drinks cans in North America, according to analysts quoted by the Financial Times. In Europe, Rexam and Ball would have a combined market share of about 69 per cent, and about 74 per cent in Brazil.

Rexam was founded as a paper company in London in 1881 by William Bowater. Ball, with headquarters in Broomfield, Colorado, is a 135-year-old company famous for its glass canning jars.

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