Earlier this week, Ball Corp. (BLL) announced an underwritten public offering of $375 million of 7.125% senior notes due 2016 and $325 million of 7.375% senior notes due 2019, for a total of $700 million in aggregate principal amount, $50 million more than previously announced. The offering is expected to close on Aug 20, 2009.
The proceeds will be used to finance the already announced acquisition of three beverages can manufacturing plants and one beverage can end manufacturing plant from Metal Container Corp., an indirect wholly owned subsidiary of Anheuser-Busch InBev.
This acquisition dovetails with the company’s strategy of expanding its 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. The transaction, which is expected to close at the end of this year or early 2010, is expected to be accretive to Ball’s earnings and cash flow in fiscal 2010.
Ball has streamlined its operations and implemented pricing initiatives and other cost-cutting initiatives like plant closures to address the current market conditions. Cost savings associated with closure are expected to be approximately $12 million annually. Given the expected cost savings from the plant closures the company expects to post higher earnings in 2009 compared to last year. However, the increase in debt will be discouraging. Thus, we reiterate our Neutral rating on the stock.
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