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How Does Ball Plan to Finance Its Offer to Rexam?

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Price movement of Ball

Ball (BLL) has a market capitalization of $8.9 billion. BLL rose by 2.0% to close at $65.15 per share as of February 9, 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are -0.66%, -6.6%, and -10.4%, respectively.

Technically, the stock has broken its support and is trading below all of its moving averages. Currently, BLL is trading 3.5% below its 20-day moving average, 6.1% below its 50-day moving average, and 5.4% below its 200-day moving average.

The PowerShares Aerospace & Defense ETF (PPA) invests 3.9% of its holdings in Ball. The ETF tracks a market-cap–weighted index of US-listed stocks involved in the defense, military, homeland security, and space industries. The YTD price movement of PPA is -9.9% as of February 8, 2016.

The market capitalizations of Ball’s competitors are as follows:

  • Boeing (BA) — $79.7 billion
  • Alcoa (AA) — $10.2 billion
  • Crown Holdings (CCK) — $6.3 billion
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Ball issued credit facilities to finance Rexam

Ball has announced the commencement of syndication for its new revolving and term loan senior secured credit facilities to refinance its existing revolver and bridge term loan facilities entered into on February 19, 2015. The new ~$3.9 billion senior secured credit facility will mature in 2021.

Ball will use its new term loan credit facilities to fund the final portion of its proposed offer for Rexam. This proposed offer for Rexam is expected to close in the first half of 2016.

Performance of Ball in 4Q15

Ball reported 4Q15 net sales of $1,804.6 million, a fall of 11.2% compared to net sales of $2,032.4 million in 4Q14. Net sales of its metal beverage packaging, Americas & Asia, metal beverage packaging Europe, metal food & household products packaging, and aerospace & technologies businesses fell by 2.0%, 14.1%, 17.6%, and 35.7%, respectively, in 4Q15 compared to 4Q14.

Its net income and EPS (earnings per share) fell to $55.3 million and $0.39, respectively, in 4Q15, compared to $76.0 million and $0.54, respectively, in 4Q14.

On January 27, 2016, the company declared a cash dividend of 13 cents per share, payable March 15, 2016, to shareholders on record as of March 1, 2016.

2015 results

In 2015, BLL reported net sales of $7,997.0 million, a fall of 6.7% YoY (year-over-year). The company’s net income and EPS fell to $280.9 million and $1.99, respectively, in 2015, compared to $470.0 million and $3.30, respectively, in 2014.

Meanwhile, its cash and cash equivalents rose by 17.0%, and its inventories fell by 11.6% in 2015. Its current ratio fell to 1.0, and its long-term debt-to-equity ratio rose to 4.0 in 2015, compared to its current ratio and long-term debt-to-equity ratio of 1.2 and 2.4, respectively, in 2014.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of Ball are 32.7x and 7.1x, respectively, as of February 9, 2016.

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