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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 an industry giant better equipped to withstand rising aluminium costs.
Rexam said it had received a proposal from Broomfield, Colorado-based Ball valuing it at 610 pence per share. Rexam's London-traded shares closed significantly lower, at 541.5 pence.
Under UK takeover rules, Ball has until March 5 to say whether it will make a formal offer or walk away. Ball executives declined to take questions about the proposal during a post-earnings conference call on Thursday.
Packaging deals are heating up as low interest rates and robust 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 and Anheuser-Busch InBev, are two of the three big players in the global beverage can market. Each controls slightly more than a fifth of the market.
Their nearest competitor, Crown Holdings Inc, has a 19 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. Kabili said both companies would probably have to divest some assets given the potential size of their combined market share in the United States, Brazil and Europe.
Jonathan Klarfeld, partner at law firm Ropes & Gray LLP, said consolidation in the U.S. packaging industry was "one of the ways to bring additional value" out of a sector with modest growth prospects.
Can makers are also contending with record-high aluminium premiums. The cost of getting the metal out of storage is expected to peak again by mid-2015 due to a supply deficit in the United States and Europe.
Ball's cash-and-stock proposal values Rexam at 4.3 billion pounds, based on Rexam's 704.8 million outstanding shares. Rexam had net debt of 1.1 billion pounds as of June 30.
Jefferies & Co analyst Philip Ng said the proposal, at a premium of 36 percent to Rexam's Wednesday close, was more expensive than other deals in the metal packaging sector.
Ball would be paying 10 times Rexam's expected 2014 enterprise value to EBITDA, said Baird Equity Research analyst Ghansham Panjabi. ($1 = 0.6538 pounds) (Editing by Savio D'Souza and Robin Paxton)