In a can

Ball Corporation is a supplier of high-quality metal and plastic packaging for beverage, food and household products customers, and of aerospace and other technologies and services, primarily for the U.S. government. Ball employs more than 14,000 people worldwide and reported 2008 sales of approximately USD 7.6 billion.

Ball will acquire four of AB InBev’s plants in the U.S. for USD 577 million or 7.5 times EBITDA. These plants focus on manufacturing cans for the soft drinks industry whose growth prospects seem better than the beer industry’s.

Ball agreed to supply AB-InBev with cans and lids from the divested plants and to continue to employ the 635 active employees of the plants.

In the first full year of operation, Ball expects the plants to generate revenue and EBITDA of about USD 680 million and USD 94 million, respectively. The plants produce annually about 10 billion aluminium cans and 10 billion easy-open can ends. More than two-thirds of the cans are produced for leading soft drink companies and the rest for AB-InBev, it was reported.

AB-InBev’s seven remaining can manufacturing plants will be geared towards beer-can production, representing more than 60 percent of AB-InBev’s current capacity. Further, AB-InBev said they had no plans or activities underway to sell the remaining plants.

The transaction is expected to close at the end of the year or early in the first quarter of 2010, subject to regulatory approval.

With the sale of the can manufacturing plants, AB-InBev have taken another step towards reducing their pile of debt, which rose sky-high with the USD 52 billion purchase of Anheuser-Busch last year.

Observers say that CEO Carlos Brito will need to trim AB-InBev’s net-debt-to-EBITDA ratio from 7.7 times at the end of 2008 to 2.5 times by the end of 2013 to receive a stock-option grant.

However, if Mr Brito continues to sell off assets which flushed in good profits it might take him longer to reach that goal than planned.