Rexam, the British packaging group, joined the global giants of the packaging industry yesterday when it struck an agreed deal to buy American National Can for £1.3bn.
The cash deal makes Rexam one of the five largest consumer packaging groups in the world with powerful positions in Europe and the United States. ANC is already the world's second-largest maker of soft drinks cans and the biggest player in Europe. The combined group would make 40 per cent of Coca-Cola's cans worldwide.
However, analysts said the deal could fall foul of the European competition authorities as the enlarged group would have more than 50 per cent of the European market. "That kind of share sounds horrible," one analyst said. "There may be some regional issues though it could get through with some minor adjustments."
Rexam, which had previously been linked with a possible bid for Schmalbach-Lubeca of Germany, admitted the possibility of regulatory problems in Europe but said there was relatively little overlap.
Rolf BÃ¶rjesson, Rexam's chief executive, said the deal was an important strategic step "The acquisition of ANC completes our three-year programme to reshape Rexam around its consumer packaging activities and make it a world leader in the sector," he said.
Commenting on the rationale of the deal he added: "Our customers are getting bigger and becoming more global. They are looking for large global suppliers to work with."
Rexam's debt will rise to £1.9bn as a result of the deal. However, the company yesterday announced plans to sell all its non-packaging businesses. These chiefly include its coated film products paper division as well as the building and engineering operation which should raise around £700m.
The ANC deal has the irrevocable acceptance of Pechiney, the French group which controls 45 per cent of ANC's equity. Pechiney acquired ANC in 1989 from Triangle Industries, the canning empire put together by US buy-out specialists Nelson Pelz and Peter May with the help of Michael Milken's junk bonds.
ANC recorded operating profits of £168m on sales of £1.4bn last year. Rexam shares closed 12.25p higher at 226.25p.