Rexam completes Latasa acquisition
acquisition of Latasa, Brazil's largest beverage can maker. Just
over 5 million shares of Latasa common stock and 80,000 preferred
shares have been acquired, bringing Rexam's ownership to 99.94 per
cent of the issued shares.
Rexam intends to effect a short form merger within the near future under which it will acquire the remaining shares it does not own. The company initially acquired 88.8 per cent of the issued shares in November last year.
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."
Latasa has now been de-listed from the Brazilian Stock Exchange.
The acquisition reflects a general pattern of consolidation in the packaging industry. "When I came here in 1996, there were 150 different units," said Borjesson, speaking at this year's Total exhibition. "In the last eight years, we have sold 100 companies and acquired a few, and we are now a $6 billion operation."
Consolidation, says Borjesson, has been the keyword. "Our customers are getting bigger. Look at the merger between Interbrew and Ambev to create the biggest brewer in the world. Look at Morrison's takeover of Safeway in the UK. There is a lot of consolidation going on, and Rexam is playing a leading role in this."
Borjesson believes that this consolidation will continue for many years.
The packaging industry has of course been beset by a few problems. The beverage can market in Germany has been hit by the much-criticised deposit regulation, which Borjesson admits has impacted on Rexam's sales. The company lost 1.4 billion units in Germany last year.
"You need to put this in perspective though," he said. "We sold 50 billion units worldwide. We have been able to compensate our losses in that sector."
