Rexam gets clearance to buy Russian can maker
authorities for its acquisition of can maker Rostar, paving the way
for expansion into one of the largest growth markets.
The Russian regulator had previously blocked the £149 million deal but now says UK-headquartered Rexam can proceed after it agreed not to increase drink can prices in Russia by more than 15 per cent annually over the next 10 years, other than in "exceptional circumstances". It has also promised to "continue to invest in its Russian beverage-can business to meet market growth". Rexam, the world's largest beverage can supplier, announced its purchase of Rostar from En+ Group Limited, the parent of Russian aluminium group Rusal, in July last year. But the firm already has other operations in Russia and it is thought that the regulator was concerned about the British firm gaining control of too much of the market. Buying Rostar will give Rexam 90 per cent of the Russian beverage can market. But in all forms of beverage packaing, the acquisition only gives Rexam 15 per cent of the market. The regulator appears to have reviewed its decision based on the latter statistic. Rexam expects to complete the Rostar acquisition in the first quarter of this year. Russia is a key growth market for beverage can producers, with use of cans growing between 8-10 per cent each year. Other can makers are also investing in the area. A recent report in Russian newspaper Vedomosti said US-based Ball was planning to build a $120 million beverage can plant in the south of the country. The paper quoted an executive of the Rostov region saying the factory will produce at least 500 million cans a year, accounting for about 11 per cent of the Russian drinks can market. Rexam is keen to expand in emerging markets as it faces declining demand from the US, one of its most important markets. In addition to slowing demand for beverage cans in the US, Rexam's sales there have also been hit by the falling dollar. And in a crowded, increasingly consolidated packaging industry, there are few acquisition opportunities left. Rostar has two manufacturing facilities in Russia with a combined annual capacity of some 3 billion beverage cans. In 2006, it had sales of US$214m, according to information from Rexam. Growth in demand for beverage cans in Russia is being driven by growing presence of international brewers and other drinks companies. In Western Europe, an average of 70 beverage cans are consumed annually but the figure for Eastern Europe is as low as 13.