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. Last Updated: 07/27/2016

Rexam Pays $297M for Can Maker

bloombergA worker checking a production line at a Berlin factory owned by Rexam, the world's biggest maker of beverage cans.
Rexam, the world's biggest maker of beverage cans, said Wednesday that it was buying Russian beverage can maker Rostar for $297 million in cash as part of an expansion drive in emerging markets.

The British packaging firm will acquire the business, including debt, from En+ Group Limited, part of aluminum giant Basic Element.

"The acquisition of Rostar is fully in line with our emerging markets strategy and represents an excellent opportunity for Rexam,'' Rexam CEO Leslie Van de Walle said in a statement.

The acquisition follows three years of intensive efforts by Rostar to find a foreign investor, Vedomosti reported.

Rostar controls about 50 percent of the country's beverage can market, and the acquisition will give Rexam a share of about 90 percent.

Rostar operates two manufacturing plants, one in Dmitrov, near Moscow, with an annual capacity of 1.3 billion cans, and the other in Vsevolozhsk, near St. Petersburg, with an annual capacity of 1.7 billion cans.

The company also owns the Dmitrov Metallurgical Plant.

Rexam said in the statement that Rostar had sales of $214 million in 2006, but profit was dented by aluminum price volatility. It said profit, however, was expected to improve this year.

Yury Shitov, commercial director of Rexam in Russia and the CIS, praised the synergies and economies of scale that would result from the acquisition.

"By controlling Rostar, Rexam will be able to streamline production while introducing state of the art technology in all its Russian holding," he said.

A spokesman for Basic Element said his company clinched the best possible deal, and Rexam came up with the best offer out of half a dozen contenders.

"We built Rostar from the scratch ... and we are proud to turn it over to Rexam as a full-fledged, profit-making company," he said on condition of anonymity, citing company policy. He said the sale would allow Basic Element to concentrate on its other businesses.

Wednesday's acquisition is not the British company's first foray into Russia. Exactly 10 year ago, Rexam built its first can-producing plant in Naro-Fominsk, 70 kilometers southwest of Moscow.

The plant became operational in 1998 with capacity to produce 2.4 billion cans, making it one of the largest in Russia.

In April, Rexam started construction of a second can-producing plant, in Chelyabinsk, and it is expected to meet a growing demand from the 60 million people living in the Urals and Siberia.

Shitov said the plant would be operational in early 2008 and consist of one production line with an annual capacity of 800 million cans.

Wednesday's deal is subject to regulatory approvals from the Federal Anti-Monopoly Service and is expected to be completed during the fourth quarter of 2007. It will not affect Rexam's current debt ratings.

Rexam's foray comes after Shell and BP gave up assets under intense government pressure. British electronics giant DSG recently backed out of a $1 billion deal to buy into Eldorado.