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By Esha Vaish and Sagarika Jaisinghani
Feb 5 (Reuters) - British drinks can maker Rexam Plc said it is in talks to be bought by U.S. rival Ball Corp for 4.3 billion pounds ($6.6 billion), a deal that would form anindustry giant better equipped to withstand rising aluminiumcosts.
Rexam said it had received a proposal from Broomfield,Colorado-based Ball valuing it at 610 pence per share. Rexam'sLondon-traded shares closed significantly lower, at 541.5 pence.
Under UK takeover rules, Ball has until March 5 to saywhether it will make a formal offer or walk away. Ballexecutives declined to take questions about the proposal duringa post-earnings conference call on Thursday.
Packaging deals are heating up as low interest rates androbust cash flows coincide with growing demand. Last week,corrugated box makers MeadWestvaco Corp and Rock-Tenn Co agreed to form a $16 billion company.
Rexam and Ball, suppliers to Coca-Cola Co andAnheuser-Busch InBev, are two of the three big playersin the global beverage can market. Each controls slightly morethan a fifth of the market.
Their nearest competitor, Crown Holdings Inc, has a19 percent share, according to Vertical Research Partners.
"The combination, strategically, just makes a ton of sense,"said Macquarie Research analyst Albert Kabili.
It might also, however, spark antitrust concerns. Kabilisaid both companies would probably have to divest some assetsgiven the potential size of their combined market share in theUnited States, Brazil and Europe.
Jonathan Klarfeld, partner at law firm Ropes & Gray LLP,said consolidation in the U.S. packaging industry was "one ofthe ways to bring additional value" out of a sector with modestgrowth prospects.
Can makers are also contending with record-high aluminiumpremiums. The cost of getting the metal out of storage isexpected to peak again by mid-2015 due to a supply deficit inthe United States and Europe.
Ball's cash-and-stock proposal values Rexam at 4.3 billionpounds, based on Rexam's 704.8 million outstanding shares. Rexamhad net debt of 1.1 billion pounds as of June 30.
Jefferies & Co analyst Philip Ng said the proposal, at apremium of 36 percent to Rexam's Wednesday close, was moreexpensive than other deals in the metal packaging sector.
Ball would be paying 10 times Rexam's expected 2014enterprise value to EBITDA, said Baird Equity Research analystGhansham Panjabi. ($1 = 0.6538 pounds) (Editing by Savio D'Souza and Robin Paxton)
