Rexam buys Brazilian can maker for £272m

The packaging maker Rexam said yesterday it had agreed to buy Brazil's leading beverage cans company Latasa for up to £272m.

Shareholders are being asked to fund most of the deal through a deeply discounted rights issue to raise £218m. Rexam has debts of £1.2bn.

Rexam, already joint leader in the world market for beer and soft drinks cans, has agreed to buy 89 per cent of Latasa from the three major shareholders. By a quirk of Sao Paulo stock market rules, it can offer 20 per cent less per share to minority shareholders.

The deal needs regulatory approval in Brazil but Rexam is going ahead anyway since a ruling could take 12 months. Rexam will have 66 per cent of the country's beverage cans but expects a favourable decision because it has only 12 per cent of the total drinks packaging market there.

News of the deal sent the shares 33p higher to 430p. Rexam has spent two years driving a hard bargain that fits its policy that acquisitions must generate cash, be earnings enhancing from year one and give a return that exceeds the cost of capital.

The rights issue is on the basis of two new shares at 255p for every 11 held. Rexam's chief executive, Rolf Borjesson, defended the 36 per cent discount to the previous day's closing price as being a narrower discount than similar recent issues by other companies. He said the issue had been underwritten - at a cost of 1.25 per cent - because he wanted to be certain he would get the money.

Rexam will produce nearly 7 billion cans a year in Brazil in modern factories scattered across the country. There are just two major customers, one of them Coca-Cola, and two major suppliers of raw materials. All contracts are priced in US dollars to reduce currency risks. Mr Borjesson says he can save up to $20m a year by removing overlaps in administration.

Currently there is over-capacity in the Brazilian beverage cans market but Mr Borjesson expects consumption, which stalled after this year's devaluation of the real, will resume its strong upward trend next year.

Karl Green, an analyst at Dresdner Kleinwort Wasserstein, reiterated his buy recommendation for Rexam yesterday, although he described the deal as "undoubtedly risky".

In a trading statement also issued yesterday, Rexam said trading in each of its sectors "remains encouraging" with the exception of cans in Germany, where tough environmental rules introduced this year are biting.

The more settled political situation in Brazil, with the incoming left-wing Lula government proving more moderate than expected, tipped the scales in favour of the Latasa acquisition. Mr Borjesson said: "Inflation is coming down, so are interest rates and consumer confidence is bouncing back."

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence