British drinks can maker Rexam says U.S. rival Ball Corp is offering to buy it in a cash-and-stock deal valued at 4.43 billion pounds ($6.85 billion). But as Grace Pascoe reports, a deal could face severe regulatory obstacles.
They're already the world's two biggest makers of drinks cans. Now they want to combine to become a global packaging giant. US company Ball Corp has offered a cash-and-stock deal valued at 4.43 billion pounds for Rexam. An attractive proposition, says Reuters BreakingView's Robert Cole. (SOUNDBITE) (English) REUTERS BREAKINGVIEWS ASSISTANT EDITOR ROBERT COLE SAYING: ''It is a 40 percent premium to the share price of Rexam before all this speculation started. It is about 10 times the underlying earnings of the company and that is a pretty generous price I think." Its British rival packages many of the world's favourite brands including Coca Cola, Pepsi and Heineken. Rexam shares rose six per cent in early trading. But there are fears that regulators might not like the huge scale and reach of a new entity as much as investors. And that if the deal collapses, there could be expensive consequences. (SOUNDBITE) (English) REUTERS BREAKINGVIEWS ASSISTANT EDITOR ROBERT COLE SAYING: ''There is a very chunky break fee. So if the competition authorities do get in the way, Ball will have to pay Rexam's shareholders about 300 million pounds - about 7 percent of the deal value - and that gives Rexam's shareholders some kind of assurance if you like that the deal will go through, or if it doesn't there will be some sort of payout." If successful, the conglomerate would be better equipped to weather aluminium costs. They've been at record highs, with the cost of getting the metal out of storage expected to peak mid year. Ball Corp says that, if successful, the deal will result in synergies of 300 million dollars by 2018.