Ball Corp's Strategic Sale Of Aerospace Business Is Path To Enhanced Valuation And Balance Sheet Health: Analyst

Mizuho Securities analyst Christopher Parkinson reiterated a Neutral rating on the shares of Ball Corp BALL with a price target of $59.

BALL has agreed to sell its Aerospace business to BAE Systems for gross proceeds of $5.6 billion in cash.

BAE cites about 13x 2024E EBITDA net of tax benefit and about $30 million of run-rate cost synergies.

The transaction is expected to close in 1H24, with a $100 million termination fee.

BALL's proceeds (about $4.5 billion after-tax) as well as strong FCF generation through BevCan ops will be utilized to further de-lever to ~3.0x (the core point), said the analyst.

The analyst views this deal announcement as a positive from a valuation perspective, as well as strategically, as it will lead to a healthier balance sheet and more focus on BevCan.

With an improved balance sheet and forward capital allocation optionality, the analyst anticipates BALL to accelerate returns through buybacks and dividends, with the timing and magnitude contingent on prevailing market conditions.

The announcement, according to the analyst, should also re-ignite the debate on Crown Holdings Inc's CCK willingness to divest non-BevCan related businesses (tinplate, aerosols, etc.) and further transform into a pure play.

Price Action: BALL shares are trading lower by 2.2% at $50.52 on the last check Friday.