Ball Corp expands into aerosol can manufacturing

February 15: Ball Corporation will be making aerosol containers again when it acquires the North American and Argentine operations of US Can Corp.

Illinois-based US Can is the largest manufacturer of tinplate aerosol cans in the US with a 55 percent market share, and also makes paint cans, speciality cans and plastics containers. Customers include SC Johnson, Reckitt, ConAgra, Sherwin Williams and Procter & Gamble.

The deal, which is expected to be completed by the end of March, involves the transfer of 1.1 million Ball shares and repayment of US$550m in debt to US Can’s owner, private-equity firm Berkshire Partners, based in Boston. Ball will acquire ten plants in the US and two in Argentina, employing 2,300 and with sales of almost $600 million.

US Can’s European business, with sales of about $250m, will be retained by US Can’s shareholders. USC Europe makes tinplate aerosol cans for personal care, household, automotive, paint and industrial products and food cans. “Ball Corporation is one of the most influential and competitive players in the packaging industry,” said Carl Ferenbach, chairman of US Can and managing director of Berkshire Partners. “The sale of these operations from US Can to Ball puts them in very strong hands and assures their continued support and development.”

David Hoover, chief executive of Ball Corporation, based in Broomfield, Colorado, said that there were plans to make savings following the acquisition. In addition to being the biggest manufacturer of aluminium drinks cans in the US it also makes steel food cans.

“We expect to realize certain cost reductions as a result of synergies between US Can’s operations and those of our existing packaging business, particularly our metal food container operations,” said Hoover. “Both utilise tinplate steel and both share similar manufacturing processes.”

It is expected that USC Europe will be run by US Can’s current chief executive Philip Mengel based at Berkshire Partners in the US. USC Europe has five aerosol can plants, managed by John Bigley, and three food can plants, manager by Mike Dick.

* Sales at Ball for 2005 rose almost six percent to $5.75 billion but net profits dropped to $261.5 million from $296 million in 2004, partly as a result of rising raw material and energy costs. Ball said it had been containing the rises but that in 2006 prices for cans, especially those made of aluminium, would have to be passed on the customers.

Comment: The aerosol can business in North America is ripe for dramatic changes, dominated as it is by welded-steel containers of the type made by US Can, the largest manufacturer in the region with a number of high-profile customers in the homecare and deodourant sectors. Ball could absorb some of the US Can manufacturing capacity into some of its own operations. How Ball may deal with the speciality and paint can businesses, in which there are no equivalent operations in Ball, remains open to question.