Ball Corporation (BLL) announced its plans to acquire the remaining 65% interest in a joint venture metal beverage can and end plant in Sanshui, China, from Guangdong Jianlibao Group Co., Ltd. Ball has owned 35% of the joint venture plant since 1992.
Ball agreed to buy the plant and related assets for approximately $90 million in cash and assumed debt. The transaction, which is expected to close in 2010, will strengthen the company’s presence in the fast growing Chinese market.
In the past couple of months the company reiterated its focus on expanding worldwide beverage can business. It recently acquired four low-cost manufacturing plants for metal beverage packaging in the U.S from AB InBev. Also, the company expanded its metal beverage packaging pilot manufacturing line at the Ball Technology & Innovation Center (BTIC) in Broomfield, Colorado.
Given its ability to generate strong cash flows, we believe Ball is well-positioned to invest in business expansion. The company generated free cash flow of $321 million in 2008 and expects to generate approximately $375 million in 2009. The company is focusing on its core businesses and is exiting from the businesses outside its strategic focus area.
Accordingly, Ball recently agreed to sell its plastic pail assets to BWAY Corporation (BWY) for approximately $32 million. Apart from investing in long-term growth, Ball has streamlined its operations and implemented pricing initiatives and other cost-cutting plans in response to the current market conditions. The company expects to post higher earnings in 2009 compared to 2008 despite lower revenues.
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