Last Week, Ball Corporation (BLL – Analyst Report) completed its previously announced acquisition of three beverages can manufacturing plants and one beverage can end manufacturing plant from Anheuser-Busch InBev (AB InBev).
Ball paid $577 million for the four plants, including associated contracts. The company raised required capital for the acquisition through senior notes offering in August.
The facilities acquired are beverage can manufacturing plants in Rome, Georgia; Columbus, Ohio; and Ft. Atkinson, Wisconsin, and a beverage can end manufacturing plant in Gainesville, Florida. The plants have an annual capacity of about 10 billion aluminum cans and 10 billion easy-open can ends. The company said that more than two-thirds of the cans produced are targeted at leading soft drink companies and the rest for AB InBev.
This acquisition dovetails with the company’s strategy of expanding worldwide beverage can business. Ball expects to realize revenue of approximately $680 million and EBITDA of about $94 million from the acquired plants in the first full year of operations under its ownership.
Though the near-term outlook remains uncertain in most of the company’s end-markets, demand for its products is expected to pick up starting 2010, primarily in the food and beverage packaging markets.
In the mean time, Ball has streamlined its operations and implemented pricing initiatives and other cost-cutting plans in response to the current market conditions. As a result, the company expects to post higher earnings in 2009 compared to 2008 despite lower revenues.
We reiterate our Neutral recommendation on Ball.
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