Rexam goes to Rio

UK-based consumer packaging company Rexam​ has acquired Latasa, Brazil's largest beverage can maker. The deal, valued at €396 million, is designed to give the world's largest drinks can manufacturer a key foothold in the Latin American market.

On paper, the agreement certainly makes sense. Latasa is the leading producer and supplier of aluminium beverage cans in Brazil, Argentina and Chile, generating sales of €347.2 million. The acquisition will position Rexam as the top can maker in Brazil, complement the company's existing customer base and extend the firm's geographical reach.

In addition, the company believes that the acquisition will create significant value for Rexam shareholders. The acquisition, in the first full year of ownership, is expected to be earnings enhancing before goodwill amortisation and produce a return on investment exceeding Rexam's weighted average cost of capital by an amount sufficient to offset the country-specific risk premium of the acquisition.

The take-over also goes some way to consolidating Rexam's position as the world leader in beverage cans, with a global market share of 23 per cent, equivalent to nearly 50 billion cans.

"Rexam's acquisition of Latasa is consistent with our strategy to strengthen our position in our chosen markets,"​ said the group's chief executive Rolf Börjesson. "On completion we will become the leading global beverage can manufacturer and the number one player in the world's third largest market, a market with good growth prospects.​

"Rexam already has operations in Brazil and Latasa is a great fit when it comes to customers and end use. Once the businesses are fully integrated we anticipate realising substantial synergies through economies of scale as well as the optimisation of production and logistics."​

The acquisition follows the company's recent deal with Leading Edge brands in the US to manufacture aluminum cans for Tampico, the largest brand of refrigerated juice drinks in America. Initial production and distribution of the cans will include two flavours, Tampico Citrus Punch and Tampico Fruit Punch. Shipments to wholesalers, distributors and retailers began this month in select states and will continue to rollout across the US throughout the rest of the year.

And a report in today's Financial Times​ suggests that the group is planning greater things. Market experts believe that the company is set to launch a substantial rights issue, with the proceeds being used to fund another acquisition. Potential takeover targets include the packaging division of Pechiney, the French aluminum group, and America's Metal Container Corporation, part of the Anheuser Busch drinks group.

In fact, talk of Rexam buying Pechiney's packaging business has gathered pace since the in recent weeks, when the French group succumbed to a takeover by its big Canadian rival Alcan.

Any acquisition in the near future would top of a highly satisfactory year for the company. Rexam's beverage packaging businesses continue to perform well, and trading in plastic packaging remains healthy. At the time of its interim results, the company stated that it was comfortable with analyst expectations for underlying profit before tax for the year ending 31 December 2003.