Ball Corporation announced that it has reached an agreement to sell its aerospace business to BAE Systems for gross proceeds of $5.6 billion in cash. 

The transaction, which is subject to regulatory approvals and customary closing conditions and adjustments, is projected to close in the first half of 2024.

Following the successful close of the transaction, the combination of roughly half of the after-tax proceeds of approximately $4.5 billion and robust free cash flow generated from the company’s packaging operations will be used to reduce net debt to pro forma expected 2023 comparable EBITDA to approximately 3.0x, the low-end of the company’s long-term leverage range. 

As a result, the company will be well-positioned to accelerate capital return to shareholders via share repurchases and dividends over a lower average invested capital base.

Daniel W. Fisher, chairman and chief executive officer, said: ”Since 1956, generations of dedicated Ball Aerospace colleagues have transformed a business of humble beginnings into a thriving enterprise offering innovative capabilities in a world that needs rapid, scalable technology solutions. 

“In recent years, the business has positioned itself to have an even greater contribution to customers’ missions and delivered fourfold growth and record levels of combined contracted and won-not-booked backlog. 

“The complementary cultural fit of Ball Aerospace and BAE Systems and their combined position as a pure play aerospace and technologies company will leverage Ball’s recent investments in talent and facilities located across the country and centred in Boulder, Broomfield and Westminster, Colorado, to provide a multi-dimensional platform for vital national defence, intelligence, and science hardware, software, and space-based assets. 

“We thank the entire Ball Aerospace team for their hard work and celebrate their commitment to continue to deliver on critical missions. 

“BAE Systems is well-positioned to invest in Ball Aerospace to elevate the combined business to new heights, generate significant value to critical mission partners, offer customers more affordable solutions and enable a safer world for all stakeholders benefitting from today’s agreement.”

Ball Corporation will utilise its share repurchase authorisation programs and quarterly dividends to accelerate the return of value to shareholders. The precise timing and amount of repurchases and the opportunity to increase the dividend payout will be determined based on market conditions, timing of receipt of proceeds and other factors.

Fisher added: ”Following the successful closing of today’s transaction, Ball Corporation’s improved balance sheet strength and flexibility, highly cash generative packaging businesses and our team’s cost-efficient ownership mindset provide an excellent equation for increasing the return of value to shareholders, maximising value from our existing operations, and investing in our future growth through the lens of EVA. 

“Executing our strategy of enabling the greater use circular aluminium packaging on a global scale continues. Our acceleration of low-carbon, best-value aluminum packaging initiatives in the years to come will stimulate organic growth across our global packaging operations and improve the world for future generations. 

“Our innovative portfolio of aluminium cans, bottles and cups for single-serve, refill, reuse and recloseable applications has untapped potential, and we look forward to unlocking that value and delivering sustainable compounding shareholder growth now and beyond.”