Dive Brief:

• Ball is selling its aerospace business to BAE Systems for gross proceeds of $5.6 billion in cash, the company announced Thursday. Ball acknowledged in June it was possibly exploring a sale.
• Ball CEO Daniel Fisher said in an announcement that the divestiture will allow the company to increase its focus on “low-carbon, best-value aluminum packaging initiatives.” It intends to use part of the proceeds to reduce net debt leverage, and increase shareholder returns via stock buybacks and dividends.
• Its aerospace sales were $1.98 billion in 2022, versus beverage packaging sales of $12.66 billion. The deal is expected to close in the first half of 2024 subject to regulatory approvals.

Dive Insight:

In 1956, Ball formed the Ball Brothers Research Corporation, which became the modern aerospace business. CEO Dan Fisher said on a call with investors Thursday that the value of the aerospace business was previously not adequately reflected in Ball’s stock. Identifying the value of the aerospace business in the market required going through the investigative process that led to the sale.

Fisher said that some of Ball’s key priorities when assessing a merger, sale, business retention or other possibilities were getting the best value for shareholders and having a good cultural fit. Ball said the deal price represents 19.6x of the aerospace business’ comparable earnings before interest, taxes, depreciation and amortization for the last 12 months.

Going forward, Ball will be a pure-play organization, with opportunities to be more “lean” and “agile.” Aluminum has a lot of tailwinds that Ball can accelerate, and the company needs to be organized to capitalize on those, Fisher said. Ball can still strengthen aluminum’s carbon footprint story as well as the cost profile for customers to adopt aluminum, Fisher said.

While the company’s packaging has been split up by beverage, cups and aerosols, Fisher said, customers today are interested in broader sustainability approaches. When talking to mountain towns in Colorado, for example, they want to know everything Ball offers to help solve single-use plastic challenges, Fisher said. In its presentation Thursday, Ball highlighted its spectrum of single-use, limited reuse and refillable options. Globally the company has 67 aluminum packaging facilities.

Pro forma second quarter 2023 net sales were $12.6 billion.

As the deal review progresses, Ball will share updates on the timeline and the use of proceeds, Fisher said. Fisher also said the company will announce a future investor day to provide more clarity on business going forward.