Thursday, July 2, 2009

Nice "bolt-on" acquisition at Ball Corp. (BLL)

AlphaNinja - Ball Corp (BLL) announced yesterday that they were purchasing 4 Anheuser-Busch InBev plants. According to the release, the plants will generate sales of $680million and EBITDA (Earnings before Interest, Taxes, Depreciation & Amortization) of $94million.

Based on the purchase price of $577million, Ball paid 6.13 times the EBITDA. That is a sweet discount to the 7.8x that Ball trades at. These figures are before any cost-cutting measures, so it could be even more accretive to earnings than at first glance.

"This acquisition fits well with our strategy to grow our worldwide beverage can business," said R. David Hoover, chairman, president and chief executive officer of Ball Corporation. "These are well-maintained, high-volume manufacturing assets that are run by very skilled, experienced can and end makers. We will vigorously pursue what we see as significant opportunities to share best practices, realize synergies and improve overall performance."

Ball stock has performed about 20% better than the SP500 over that last two years. The company has a sizable debt load, but their operating cash flow covers interest payments by a healthy margin. FCFY (Free Cash Flow Yield as a % of Market Value) is a pleasant 8.2% -->> not bad, but I'd be more interested above 10%.

A glance at the March earnings - Europe sales were weak and also suffered from US dollar translation, and North American results were weak as well.

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