Chennai, India, plant will be up and running by the end of next year

Rexam refuses to stop investment activities despite Ball Commission concerns

By Jenny Eagle

- Last updated on GMT

Rexam continues investment activities despite Ball investigation

Related tags European union

Rexam says its Q2 2015 financial results are in line with expectations, and claims ‘although the Ball offer is taking some of our time, we continue to manage the business focused on our strategic priorities’.

Referring to acquiring a $122m 51% stake in United Arab Can Manufacturing (UAC) in Saudi Arabia and beverage can plant Envases Del Istmo SA (Endelis) in Panama from SABMiller, Graham Chipchase, CEO, Rexam said: “We haven't stopped activity because the Ball deal's going on.”

Concerns in the European Economic Area

Ball Corporation agreed to buy Rexam for about $6.6bn in February this year and the proposed deal is currently under investigation by the European Commission after the agency said it had concerns it may reduce competition in the beverage can and aluminium bottle manufacturing industry.

The Commission has until November 25 to investigate in-depth the proposed acquisition​ and determine whether these initial concerns in the European Economic Area (EEA) are founded.

Chipchase said Ball shareholders voted on the issuance of new stock to support the Ball deal on July 28, ‘pretty much unanimously’, above 99% and the Ball Board unanimously recommended the offer.

So, I think that's a big hurdle that's now been passed​,” he added.

We continue to focus on the strategy for Rexam and we split the strategy into four areas of priority. We're still looking at obviously how we grow the business, so the UAC acquisition in Saudi Arabia and the acquisition we made with our joint venture partner from Guatemala in Panama is progressing very well, and that business is doing well in terms of growth​.

When it comes to the anti-trust process, the process is run by Ball. In the US and the FTC back in April it went into what's called a second request which is completely normal and expected​.

And then on July 20, the EU put the deal into what's called Phase II, again as we expected. And what Phase II is, is a more detailed in-depth investigation of the deal, both in terms of the economics, and how it affects customers and consumers.

It can run until November 25, so 90 days. It can be extended, and really all it does is it allows more detailed discussions, negotiations, and is exactly what we expected to happen. So in terms of the timetable, we are exactly where we expected we would be. We're still expecting to close the deal in the first half of 2016.​”

Long-term strategy for India

One of Rexam’s long term strategies is to ‘win India’ as part of a 10-year timeframe.

The company has secured land in Sri City (55km from Chennai), Southern India and Mahindra World City, Jaipur, Northern India, to build a beverage can plant.   

The plant in Sri City represents an initial investment of close to £50m and will add a total production capacity of close to 800 million cans. The plant in Sri City is expected to be operational by H2 2016, creating 150 jobs.

The new plant in Chennai, India, will be up and running by the end of next year​,” said Chipchase.

We could have got a short-term cost advantage by just expanding the capacity of our existing plant in Mumbai. But if you take a longer-term view, and particularly if you think about India being a huge country with very poor infrastructure, so that the ability to ferry cans all across the country is very difficult and expensive, it makes much more sense for us to build a plant in Southern India to expand our footprint​.

We also procure the rights for land - a site in Northern India, so that when the demand really does get up, we'll have a Northern India/Southern India and then we'll be on the west coast which gives us a really good footprint advantage.

Not only does that lower the freight costs of shipping cans around, but it makes it much more difficult for anybody else to come into the market and take share. Because we automatically have an advantage by being there with low freight costs.​”

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