Ball Corporation (BALL) Earnings Call Transcript & Summary

Good morning, and thank you for standing by. Welcome to Sonoco's conference call with your host, Roger Schrum, Vice President of Investor Relations. The floor is yours.

Thank you, Carmen, and good morning, everyone, and welcome to Sonoco's conference call to discuss our announced plans to acquire Ball Metalpack. Joining us this morning are Howard Coker, President and CEO; Rodger Fuller, Executive Vice President; Rob Dillard, Vice President of Corporate Development and Strategy; and Julie Albrecht, Vice President and Chief Financial Officer. During today's call, we will be referring to a presentation, which was posted on the Investor Relations section of our website, along with the news release, which was issued before the market opened today. But before we get started, let me remind you that today's presentation contains a number of forward-looking statements based on current expectations, estimates and projections. These statements are not guarantees of future performance and are subject to risks and uncertainties. Therefore, actual results may differ materially. Additionally, this presentation contains the use of non-GAAP financial measures which management believes provides useful information about Sonoco's and Ball Metalpack's financial condition and results of operations. Further information about our use of non-GAAP financial measures, including definitions as well as reconciliations of those measures to the most closely related GAAP measure are available in our annual report and on the Investor Relations section at sonoco.com. Now with that, I'll turn it over to Howard.

Thanks, Roger, and good morning, and happy holidays to everyone. We are extremely excited about our agreement to acquire Ball Metalpack, which is one of the largest steel packaging solutions companies in North America. But before we address the strategic and financial rationales for the transaction, I want to spend just a few moments to remind you how this action fits our strategy. As this illustration on Slide 3 shows Sonoco is a unique packaging company as we offer our customers the strength and stability that comes from more than 122 years of experience as well as options and flexibility to meet their changing needs. On Slide 4, just 10 days ago, we spent time reviewing with many of you our go-forward plans and the steps we're taking to activate a strategy, which we believe will make Sonoco better than ever. On Slide 4 again, is a list of the key takeaways from our December 10 strategy discussion. As a reminder, our value creation strategy is focused on being the benchmark yield and stability packaging company. We're targeting to grow to $1 billion in annual EBITDA by 2026. A key to our strategy is investing in our core consumer and industrial businesses to augment growth, improve margins and generate strong cash returns. We told you we were on a journey to execute an operating strategy where we will implement self-help actions that should generate approximately $180 million in annual EBITDA over the next 5 years. We're working to simplify our structure to build a more efficient and effective organization, and we will manage our portfolio for fit around fewer, bigger businesses. Finally, we will use acquisitions to improve our portfolio and complement our overall strategy. This strategy led us to Ball Metalpack. For those of you who don't know that much about the company, Ball Metalpack was previously part of Ball Corporation and was formed in 2018 of a joint venture between Platinum Equity, which held 51%; and Ball Corp, which retained 49%. The company is a U.S.-based leading manufacturer of steel, template food cans, aerosol cans as well as closures and packaging components. The company expects to generate approximately $850 million in sales this year and adjusted EBITDA of approximately $111 million. And its outlook for top line and bottom line growth is extremely compelling. With over a century of manufacturing experience and decades of deep relationships with many blue-chip customers, demand for Ball Metalpack's food cans and aerosol products has benefited during the pandemic as consumers ate more meals at home, spent more time fixing up their residences, and as we told you at our investor conference, we believe these trends will continue as more consumers are working at home, a number of consumers spend more time discovering the value and the efficiency of cooking their own meals and performing do-it-yourself home projects, which impact the aerosol as well as our legacy [indiscernible] business. The Ball Metalpack has also shown improved performance as a result of its strategy to invest, to update technology, drive growth and improve productivity. On Slide 6, you can see a map that depicts Ball Metalpack's U.S. manufacturing footprint and how its operations are situated in close proximity to its core customers. As part of its strategy to upgrade its manufacturing assets, Ball Metalpack has developed centers of excellence for both its food and aerosol can production. And as a reminder, Ball Metalpack is not only one of the largest U.S. food can producers and also as the leading producer of steel aerosol cans used for a wide range of consumer household products ranging from paints to cleaning products and more. We're very familiar with one of Ball Metalpack's centers of excellence in Canton, Ohio. Sonoco previously owned Canton facilities in Brookline and Warner Road. In fact, I, as well as Rodger Fuller personally ran these 2 operations when we led our Sonoco-Phoenix metal ends and closures business. These were very good operations that we only sold because we were not an integrated steel can producers and other strategics made their own investments in this space. Because of this long relationship, it should not be a surprise that Ball Metalpack's people and operating culture are a near mirror image of Sonoco's. Ball Metalpack's vision is to drive an uncompromising commitment to safety, quality, service and sustainability. These attributes are key to Sonoco's culture and values and complement our belief that people build businesses by doing the right thing. On Slide 7, there are many reasons why acquiring Ball Metalpack makes sense for Sonoco. First, it underpins our enterprise strategy to be a stable, defensive strong cash flow-generating business. Ball Metalpack's assets complement our largest consumer packaging franchise, which is our iconic global paper cans and closures business. Our operations utilize complementary technologies, and if you were to go into a Sonoco can or closures plant, it would seem very similar to a metal can operation. This acquisition also aligns with our strategy to have fewer bigger businesses while enhancing our commitment to can-making. Furthermore, this acquisition would have us doing more of what we do well. And to go with that, we have identified many value-enhancing synergies and process optimization opportunities. Finally, this transaction places capital allocation at the forefront of our strategy to improve free cash flow generation to support our investment-grade credit rating and our desire to return significant capital to our shareholders through growing dividends. I could go on about why we believe this combination makes sense for Sonoco, but let me turn the call over to Rodger to speak further about Ball Metalpack's operations and complementary sustainability strategy.

Thanks, Howard. Good morning, everyone. During our Investor Day presentation, just over a week ago, I spent a good portion of my time talking about our global paper can business and how we plan to invest $50 million over the next 2 years to improve our technology and production capabilities around the world. We believe adding Ball Metalpack to our portfolio will make Sonoco as a can maker of choice. As Slide 8 illustrates, adding Sonoco's paper can assets with Ball Metalpack steel can options further supports our commitment to can making. As a reminder, Sonoco is a global leader in advanced paper can technology with sales of approximately $1.3 billion. We operate 43 facilities in 16 countries, producing more than 7.2 billion cans annually. Also, we produced more than 9 billion metal ends and more than 1.5 billion other caps primarily for our internal can-making operations. Ball Metalpack produces approximately 6 billion food and aerosol cans annually along with closures and components. They've been adding new technology and production capacity to meet new demand, which should add to top line and bottom line growth over the next 2 years. Combined, our pro forma can operations are projected to generate more than $2 billion of sales annually. Over the past few weeks, I've had the opportunity to spend time in Ball Metalpack's operations. I've been very impressed not only with the operations, but especially with the people and the data-driven processes they've implemented to significantly improve productivity. As we start the integration process, I truly believe we'll be able to share a number of best practices that will benefit both of our operations. Sonoco has a long history built around our commitment to sustainability and ESG. We are one of the only packaging companies that operates a top 10 recycling business that annually recycle approximately 2.8 million tons of recovered paper, metals and plastics from our 4 material recover facilities and 20 other recycling centers serving more than 100 communities throughout the U.S. We've been extremely focused on expanding our portfolio of more sustainable products and adding Ball Metalpack further augments our recycling packaging offerings. Metal packaging is the #1 most recycled packaging substrate in the U.S. followed by paper packaging. By joining with Ball Metalpack, we'll be one of the largest users of permanently recyclable material. Metal packaging also has superior barrier properties, making it ideal for food preservation and it complements our wide range of barrier can offerings. Finally, Ball Metalpack has been leaning away in developing lightweight opportunities to reduce material use and improve cost savings. In my interaction with Ball Metalpack's leadership and people, I can tell you, we are all very excited about this mutually beneficial combination. Now with that, let me turn it over to Rob Dillard to further discuss the transaction metrics.

Thanks, Roger, and good morning. Consideration for the transaction is $1.350 billion. The transaction generates tax benefits, which have an estimated net present value of $180 million. We consider these tax benefits in evaluating the net transaction value of $1.170 billion. In addition, we anticipate savings from working capital but have not included these in our net transaction value. 2021 adjusted EBITDA is estimated to be $111 million, and we anticipate achieving $20 million of synergy. The net transaction value has a multiple of estimated 2021 synergy adjusted EBITDA at 8.9x. Importantly, the transaction is expected to be immediately accretive to earnings per share in 2022, and we expect additional accretion in 2023 from synergies, new business development and productivity savings from recent investments. This is an all-cash transaction. We have committed that financing and anticipate issuing permanent financing before closing. As Howard said, we remain committed to our investment-grade credit rating and our pro forma net leverage is estimated to be approximately 3x at closing. The transaction is expected to close in the first quarter of 2022, subject to customary regulatory approvals. Slide 11 exhibits how this transaction advances our fewer bigger businesses strategy and increases our focus on stable, defensive high cash flow businesses. The column on the right of this page indicates the progress towards those objectives. Based on our estimates, the combined [ issue ] would achieve revenue greater than $6.4 billion and adjusted EBITDA greater than $873 million, while maintaining our 14% EBITDA margin. Furthermore, we will have more scale on defensive consumer markets while increasing our exposure to the stable and resilient U.S. market. Now Howard will provide closing comments.

Thanks, Rob. Let me close with some key takeaways regarding this highly strategic acquisition. We believe the complementary acquisition of Ball Metalpack expands our core can-making franchise to the benefit of our customers and our people. As Rodger emphasized, it adds to our portfolio of recyclable and sustainable packaging offerings while advancing our commitment to ESG initiatives. We believe this acquisition is being achieved on an attractive valuation with significant tax and net working capital benefits. It meaningfully increases our can-making scale, and we believe there is a significant synergy potential and opportunity to share technology and process optimization expertise. At Sonoco, our purpose is better packaging, better life. What that means is that we're committed to creating sustainable packaging solutions that help build our customers' brands, enhance the quality of their products and improve the quality of life for our teammates and other stakeholders around the world. We believe the acquisition of Ball Metalpack will make Sonoco better than ever and underpins our commitment to grow scale while maintaining a strong balance sheet and cash flow generation and meets our objective of having a portfolio of fewer, bigger and better businesses. Before we take your questions, I want to thank Platinum and Ball leadership for entrusting us with this asset. We are excited about this business, and we're looking forward to bringing Ball Metalpack's 1,300 teammates into the Sonoco family. So with that, operator, would you please review the Q&A procedures?

[Operator Instructions] Our first question is from the line of Ghansham Panjabi with Baird.

This is actually Matt Krueger sitting in for Ghansham. I guess my first question is just that the purchase price of the transaction seems pretty substantially ahead of what the business sold for several years ago. Can you talk a bit more about maybe what has changed in this business that's made it significantly more valuable than at the time of the prior sale or maybe why it could provide significantly more value under the Sonoco umbrella? Just some more -- some details there would be great.

Yes, Matt. Again, from a net perspective, even then if you look back, it would be a bit of a premium to how they form the joint venture. But let me remind the commentary of they have spent over the last 3 years, somewhere in the neighborhood of around $200 million of recapitalizing the operations. And those dollars were spent towards productivity. They were spent towards new business opportunities. And we clearly recognize -- in fact, some of these assets have been coming on stream as recently as 2 months ago. So there is a tremendous amount of pent-up productivity as we look into the forward years that would cause us to be extremely attractive to the go-forward of the business.

Great. That's very helpful. And then just following up there, thinking about the business more broadly, as Sonoco's business more broadly, can you talk about what the ongoing focus is for Sonoco's product or business portfolio? What commonalities do Sonoco's businesses have at current kind of looking at the entirety of the portfolio? And how does the combination of businesses set up the company for sustained competitive advantages? Where are the competitive moats that you see across kind of the different pockets of the Sonoco business with the addition of Ball Metalpack.

Sure, Matt. Going back to our Investor Day presentation, we really highlighted how you can look at our businesses in terms of buckets and there are 5 different potential looks of the business, being our can business, our flexible business, our protective business, thermal forming. But the real -- I think the real heart of the question is back to our statement around where are we really focusing, particularly from an acquisition perspective. And we highlighted there were 3 key parts of our portfolio. Number one was our cans and closures business. We have just an exceptional business -- global business model. And obviously, where this one ties in, just hand in glove. The second was our industrial paper business. And in both cases, you're talking about #1 global positions. The third was flexibles. And no, we're not -- we don't have our sights on trying to become the #1 flexible manufacturer in North America or even globally, but we have a very, very nice niche within that sector that we're going to continue to focus on, particularly from an acquisition perspective. So when we talk about fewer bigger businesses and where we're going to be spending most of our energy from an inorganic basis, that is the message from 10 days ago, and I think that just helps support what we were trying to get across during that conversation.

Our next question comes from Adam Josephson with KeyBanc.

Howard, can you just talk about the -- you mentioned the deal is going to be accretive to earnings, which I think one would expect, just given that it's debt-financed. But can you talk about what kind of spread over the cost of capital you're expecting and how that compares to other potential opportunities you would have had for cash deployment, be it buybacks or otherwise?

Who could, Rob or -- we have Julie here as well.

[indiscernible] the question, Adam. I mean we certainly consider all our alternatives for uses of capital. And we thought this as we evaluated it and we're proactive about it. I thought this was the best use, both as the use of capital today, but also to advance the strategy for tomorrow. So this is obviously going to be financed with permanent financing at favorable rates, and we're excited about deploying that capital in this business.

Got it. I appreciate that, Rob. Howard or Rob, can you just compare this deal to some of the other deals the company has made over the past decade or so? Some have worked out well, others less so. And I'm just wondering how you would frame this deal compared to what the company has done historically and when I say historically from, call it, 2011 onwards?

Yes. Thanks for the question, Adam. I've spoken over the last year or so about the amount of work this executive team has done to establish our go-forward strategy. But part of that was taking a look in the rearview mirror. And we literally went back, I think, the early 2000s. And we looked at every acquisition that we completed during -- from that time frame to today. And one of the things that became extremely obvious to us and you guys have heard me say this, that we're not interested in doing acquisitions that we don't have a right to win in. And what we found is that we invested in our core competencies, the foundation of the company. We invested in our can business, we invested in our industrial business, we had very solid and great success where we struggled. And I'm just going to say it, you guys know it, is when we stepped out and maybe jumped over the fence into another neighborhood. So that's been the message that I've been trying to deliver to you guys quarter-over-quarter in terms of where we're looking from an acquisition perspective. And even in this direct example, going back now probably 18 years ago when we acquired the Sonoco-Phoenix assets, which makes easy-open closures for the metal can process food industry selling in the folks all the major CPGs, all the major can companies, that one was a home run. It was only when I've said in my script that the strategics that had the can body started investing and catching up, we were early to the market that we were disadvantaged because we didn't have the total package solution. In fact, in those days, we actually said, well, do we downward integrate and start making cans, but the reality is it was a fairly concentrated market with very good strategic players, and there was no room for us to enter the market. So a prolonged way of saying, yes, we are critical ourselves with some of our acquisitions over that time frame. But when we have nailed it is when we our end businesses that are direct or 1 degree left to right of our true core competencies.

Yes. I completely understand that, Howard. And just 2 questions about the business itself. Can you just talk about how the contracts are structured in terms of the pass-through -- the metal pass-throughs, the nonmetal pass-throughs? In other words, how exposed are you to fluctuations in raw materials, freight, labor, et cetera? And then just talk about the nature of the customer contracts you have and the opportunity for new business that you talked about?

Sure. The contracts are almost identically aligned with our can and closures business with good reasonable recovery on a timely basis. Even probably more so in this business where most contracts are, say, annual contracts, but so are the key raw materials, i.e., steel is typically an annual contract. So there is not much price cost lag at all in our can business and our closures business and again, it's reflective in this business as well. So not a lot of exposure.

Yes. And just one last one, Howard. On your food can demand outlook, obviously, the U.S. food can market has had a renaissance, thanks to the pandemic. I mean this is a declining market for over a decade and then all of a sudden, demand just exploded and really hasn't given back too much of what it gained. And I'm just wondering where you think the market goes from here? Do you think it there is some decline that has to be expected given how much the market went up in last year and the early part of this year? Or I'm just wondering what your long-term demand expectations are relative to where we are today.

Yes. So relative to where we are today, we kind of model that low single-digit type of go-forward. I would say, and particularly last year, and I think there's other strategics that have made these comments as well, the supply chain shortages have really dampered what could have been a banner-type situation. So when we look year-on-year, there were pockets of spikes coming into this year. But for the most part, with the shortages of steel, issues at customers, et cetera, it wasn't as material as you would think. The other thing, I guess 2 points. Our work has shown that there's 3 growing -- relatively growing categories in the food or the can -- the metal can space. And 2 of those 3 represent what probably about 60% to 65% of the total turnover of Ball Metalpack. The other is we really like the aerosol business and that it seems to carry good stability, growing a GDP and it complements very nicely our adhesives and sealants business. I got very comfortable early in our due diligence when I walked through our lows and I passed all of our caulking cartridges and then get right up to the [indiscernible] and realized that the majority share of those were part of Ball Metalpack and the customers are very similar customers. So I just didn't want to leave that out that it's -- and possibly less seasonality associated with the aerosol side.

I'm sorry. Go ahead, Rodger.

And this is Rodger. And that low single digits includes some new products that Ball Metalpack is introducing, spent over $20 million on a new component and closure customer. Started up 2 new can lines, high-speed can lines in the last year. They are ramping up as we speak. So in that go-forward low single digits has some good growth that the team has done a good job of bringing on over the past year.

Great point.

Got it. So that's not market growth per se. That's more just -- that's Ball Metalpack growth. So your market view may be a little different than that?

Correct. Correct.

Our next question comes from Joe Spector with UBS.

Just a quick follow-up on one of the prior questions, just on price cost in 2021. Just to confirm, that's near 0 impact, you'd say, for last year? So as we look towards growth into 2022, it's more volume and synergy, there's not really a price cost tailwind to come?

Yes. I think there's probably some price cost tailwind, but not necessarily material.

Okay. That's helpful. And just wondering if you can give some more comments on the tax savings you see. And specifically, how much of that is related with NOLs? And just curious how comfortable you are at those NOLs stay intact after the acquisition?

This is Julie. Really most of that tax benefit, that net present value of around $180 million, really most of that is from intangibles and fixed asset step-up and that related D&A that we're able to benefit from a tax perspective. And really quite frankly, not as material as the benefit from the NOLs. But we actually feel very good about being able to realize those benefits.

Put it front-end loaded as well.

Yes, we do. We actually expect to have a nice benefit, again, in 2022 up from a cash tax perspective on some of that, yes. But it is -- ultimately, it is spread over a number of years.

Okay. So just a clarifying point on free cash flow. Should we assume CapEx for the asset is around D&A, so about $50 million?

No, I think we modeled that to around $25 million or so, although there is a couple of go-forward in a year or 2 growth-related capital that we expect is going to play, that's a couple of years from now.

Our next question comes from Mark Wilde with the Bank of Montreal.

Howard, kind of first question. If we just step back over the last 3.5 years, 3 of the 4 biggest can makers that we deal with in the public markets have exited the food can business or started an exit of the food can business. At the same time, you're buying in. Can you talk about why it doesn't work for them and why it will work for you?

Sure. Mark, I guess our assessment and this is really in the Western world, Europe and North America. I would suggest to you that several of the larger ones are heavily involved on the aluminum side. And they've got choices to make from a capital perspective. We all know the story of what's going on in aluminum. And I think they, as well as our shareholders, are more interested in them deploying their capital towards that space versus this very stable, strong cash flow generation business. So that's our take on it. I think it's creating a pretty interesting time right now. It's kind of reminds us of the '70s and '80s in the paper-can business when there was quite a few of us out there, and folks just started like it was in this core to them as maybe other portions of the business, and we were able to go in and create a very, very nice global position around that. So Mark, that's really our thinking at this point in time.

Yes. I guess -- thanks. I guess along with that, it seems to many of us, I think, watch the industry, that there's probably more room for consolidation in the food can business, particularly in North America, where there's really been 4 players. What are your thoughts on either further consolidation in North America or interest in this business in overseas markets? In your composite can business, you've got really a global footprint. So should we expect over time to see you either do more things in North America in the food can business or to do things in offshore markets?

I would say right now, being at December 20, and we're just announcing a deal, our focus is on landing this one, integrating this one, knocking at all the part in terms of our go-forward expectations. And we'll cross the bridge as these other assets, which most likely will be coming into play when that time happens. But right now, the focus is on execution.

Okay. Last one for me. Just the biggest player in food cans in North America is Silgan. They have clearly struggled with valuation around the food can side of their business. So can you just maybe Julie or Rob talk with us about whether you looked at sort of how the food can business seemed to be valued within Silgan and if that informed your thinking about this acquisition at all?

I'll just take that, Mark. No. Look, I think Silgan has done a nice job and their diversification program. We think of this in the same context as our own can business. For years and years, gotten criticized and that, hey, you've got a slow to low-growth business, maybe declining in certain markets, but we've continued to generate really, really nice productivity and cash flow off of that business. I don't think we're in a position to say how someone looks at another company and says, be it their mix, their leverage, they're all the things that go into valuation, may want to model that out. So we're excited about it. We think there's really a pent-up opportunity going forward and fits very nicely, again, hand in glove with what we do day in and day out around the world in 18 nonprocess cans and closures.

Our next question comes from George Staphos with Bank of America.

This is actually [indiscernible] on behalf of George today. I was hoping you could just expand further upon your synergy realization, exactly where you expect those to get those from over the next couple of years? And then also just want to confirm the CapEx or capital requirements of this business going forward.

Yes, that's a good question. We've done a lot of work evaluating the synergies and the opportunities that combine these businesses. There are synergies really from SG&A best practices to be had, also supply chain and procurement synergies as well as some incremental kind of operational best practices that we think we can drive -- that will really drive some nice productivity. So I think that is kind of, as we said, spread out over 3 years, but we're really excited about that opportunity. With regards to CapEx, the legacy maintenance CapEx of this business was in the order of magnitude kind of $10 million and the previous owners or the current owners have really stepped up capital investments. And we think that, that sets the business up well. We think that we'll be able to kind of maintain what we modeled was $25 million to really continue that trajectory. So we're confident in that and have seen some opportunities, but we evaluate capital opportunities on an ongoing basis as well.

Our next question comes from Kyle White with Deutsche Bank.

Can you just help us understand the mix of the food can business in terms of how much is more related to pet food that is growing versus vegetables and soup that might be kind of in a flattish, in secular decline?

Let me take a stab at that one and I'll pass it on to Rob if I stumble. But very low -- the 3 categories that are internal and external research has said, look, pet food is growing, beans are growing and tomato-type products are growing. This asset does not participate materially on the pet side. But as when I referenced earlier, probably 60% of the business is related to those other 2 that are seeing slight growth, and that's the beans and the tomatoes. So about 60%, Rob, of the volume. And then the other 40% is, I guess, multiple different types of products.

Yes, that's right. It's about 2/3 is vegetables, which is Howard, it's mainly comprised of beans and tomatoes with really good position there with great leaders in those sectors. Soups and others is kind of 18%, and then they have a leading position in the canned dairy products and then also kind of seafood and others kind of round the dial.

Got it. That's helpful. And then just on the supply chain. Can you just give us some details on the overall supply chain for the business? Obviously, one of the largest players there has had some issues with tinplate supply and quality. Also, just how is the labor there? This is a business that probably ran pretty hard during the pandemic, and I'm sure there's a lot of overtime hours leading to some of the older generations kind of looking for a pause and maybe accelerating their plans for retirement. Just any kind of update on the overall supply chain.

Yes, struggled a bit, as I noted earlier, through this year. But right now, it looks like they're fairly well contracted for needs going into next year for the contracted and planned on -- it looks like it's not going to be an issue going into this coming year. Labor is no different than anybody else, pockets around the country. We didn't -- as Rodger can probably speak to it as we visited all the facilities, it just didn't seem formed from what we were seeing in our own facility.

Yes, typically maybe 5% to 10% short on labor. I think overall, they've done a really nice job of keeping people and keeping people motivated and happy through the pandemic. Very strong technical teams, very strong plant leadership teams, good motivators. So we didn't see anything at all that would concern me about keeping people going forward. And most of these plants have been established can plants for many, many years. So you got very dedicated employees there that aren't looking to pick up and go down the street. So I didn't see anything there unusual. And in fact, I think, very strong culture across their plants, which is very, very encouraging to us.

Our next question comes from Salvator Tiano with Seaport Research.

So firstly, you got the 2 questions before about food cans whether it would reach the top of the market. I just wanted to ask a little bit in a different way and understand. You're saying that it's going to be around $110 million in EBITDA for this year for Ball Metalpack. And when the business was -- when the JV was created in early -- mid-2020 -- mid-2018, the EBITDA was under $80 million. So when we think about this $30 million growth, can you provide more -- some more color about how much may have been due to the market growing from COVID? And how much could be specifically for the business with new customer wins and organic volume growth?

Thanks for the question. Let me just start by saying Platinum and the leadership team just have done a remarkable job. Contrary to what so much of are used to in the private equity world seeing how much you can lean out of a business, they've leaned into this business. So they have spent substantial dollars from a productivity perspective as we've already talked about, I think, under the joint venture, somewhere around $100 million. And the lion's share of that was upgrading equipment, really creating state-of-the-art type operating environment. So I can't speak enough about Platinum's model as opposed to many in that side of world. And then -- so you got a bunch of it coming from productivity, but also we've mentioned earlier that spent about $20-some-odd million taking a self-manufacturer out and new business associated with that, and it's going to take some time. They're still debugging that one. But really, it's -- Platinum focused on improving operations is probably the biggest step-up from the time they formed to where they are today. And from our perspective, and this has been mentioned a couple of times, you're talking about new customers that are coming on that Rodger noted, the equipment being debugged right now. You've got 2 new can lines -- the 2-piece can lines that have been installed, state-of-the-art, one of which only was commissioned last month. So we look at where they are today, but the forward look is really exciting about how they position the business and what the future holds.

Okay. Great. And I just want to understand a little bit from a feed standpoint, you did mention it fits to your strategy of expanding in cans and ends. But you're -- I guess, the composed of the paper can business, not the food can business. So can you talk a little bit about some of the manufacturing differences or similarities between the metal can business and the food can business? And also when it comes to the commercial strategy, is there any -- are there any significant opportunities, any significant customer overlap?

What I'd suggest to you, first off, paper cans were an [indiscernible] sheet of metal cans. So a 3-piece paper can outside of the winding of the body utilizes metal assets. So [indiscernible], they're not built for our business. They're built for metal cans. So if you go into a can line and you watch a can line being run in one of our operations, making 3-piece cans, you get past the formation of the body, similarly on steel cans. You get the substrate difference on the front end, and then you're talking about very similar type assets being managed. On the metal componentry side, you walk into -- we've got 3 dedicated plants producing nothing but sanitary and easy-open end and it is 100% the same, from the lights [indiscernible]. What's difference is, is walking into, say, their accounting operation, they acquired from us that they've created centers of excellence for supply and componentry. They've got 2020 type technologies versus the rest of the industry out there, including Sonoco with 50-year-old coaters and colors. And again, I'm just going back to where I was before about how Platinum's view in terms of putting capital in play, what's the right one to make a step-change against the base, but also a step-change in the market against the competition. But very similar.

And so on the commercial side, very similar to our paper can business. You have the major food companies that we deal with every day, long-standing relationships, long-standing contracts. Then on the aerosol side, we service the adhesive sealants market as well. So very similar customers on that side of the business. So commercially, almost dead on the way we handle our relationships in our global paper can business. So very comfortable with how that sets up as well.

Okay. Perfect. And the last one, if I may, a little bit on capital allocation going forward. You said you intend to delever in the next 2 years and obviously maintain investment-grade rating. I think even if you were not to delever, you would still based on the metrics and your EBITDA, your net leverage including pension, you'll probably still be under 3x and maintain the investment grade. So essentially, you desire just to delever, but you don't necessarily have to. So what would be your target ideal leverage a couple of years out? In another way to ask it is what other opportunities or do you have to deploy capital in terms of M&A or buybacks within the next 2 years?

So we really don't have a target leverage. And I agree with you that this kind of puts us at the midpoint, if you will, against our peers anyway. So yes, look, our focus right now would be to draw it down. But given that we have the right opportunity that meets all of our stated criteria, we could be coming back with even another acquisition. But the focus would be to generate more [indiscernible] in the meantime, if that doesn't happen, so that we have the balance sheet to do transactions just like this.

Our next question comes from Arun Viswanathan with RBC Capital Markets.

Congratulations on the transaction. I guess, just first off, I just wanted to understand that tax benefit. Were these assets written up in 2018, I guess, to full value? And so I guess, are the sellers of these assets going to be receiving that whole $1.35 billion in cash. Is that right?

Yes, that's right. There was definitely some tax structuring that preserves some attributes at that time and also enables the buyer of these assets to benefit from those tax attributes.

Great. And then just secondly, on the market outlook. I think from an earlier question, we have seen the incumbents, I guess, exit the industry, you're getting into it. And maybe is there maybe like a longer-term or medium-term growth rate you could provide for food can as well as for aerosol can in North America?

I think we addressed it earlier. Right now, we're looking at low single digits and a GDP type on the food can side and GDP on the aerosol side, it's the way we're thinking about it.

And our last question is from Adam Josephson with KeyBanc.

Howard, just wanted to follow up on what Mark asked about earlier, which is you mentioned the aluminum guys have been selling their food can assets to fund their growth in beverage cans. And even Silgan, the largest North American food can producer has been paying up for closures assets to diversify away from food cans. And you're doing the exact opposite, as he mentioned. I'm just -- I understand exactly why you're doing it. But I guess could you just compare your approach to what so many of your peers seem to be doing, which is essentially chasing after higher growth businesses, which would presumably be valued at higher multiples. They seem to want to get out of food cans because it's perceived as this low multiple business. And I'm just wondering how you think about that issue, just generally speaking.

I've already addressed and I guess somewhat speculatively on why major strategics are moving away. Yes. Again, part of our strategic planning work is obviously sitting down with our investors and understanding what their expectations are. And we look at really our 2-core franchises that being obviously our can and closures and our global industrial business that make up a significant percentage of our company. That haven't been growing businesses. But we have done an excellent job year on and year out, improving the cash position on these businesses. And when we look at our investor base, they really do value the fact that we've got probably one of the highest dividend yields, consistent dividend paying, high yield, not taking unnecessary risk with our balance sheet, being prudent and being, as we said earlier, one of the more stable value-generating businesses in this space. And that model has worked for all these many years with some, I guess, left to right, on occasion that we've talked about, trying to say that we need to diversify away and we'll have to wait a minute. We have generated just a hell of a lot of value running businesses that we know how to run and run well. And I think that is right down the middle in terms of what our owners are looking for.

Completely understood. And just one last one along similar lines, which is years ago, all the rates was getting bigger in emerging markets. And here you are buying a 100% U.S.-based business such that your exposure to the U.S. is now 70%. Was that -- were geographic considerations at play here at all? And was wanting to get bigger in developed, stable markets or not particularly? It just so happened that that's what happened given that you bought this business?

Just not -- yes. No. It just happened. It wasn't a stated strategy to become more North American base. But it's certainly added to the attraction and our high level of confidence in terms of integration, that it's our biggest can market where -- in our backyard that we're going to be able to bring this business on seamlessly. It will make it a much easier integration than say, doing it overseas somewhere, but it wasn't part of a strategy to move to a more highly concentrated North American company.

Thank you. And this ends our Q&A. I would like to turn the call back to Roger Schrum for his final remarks.

Thank you again, Carmen. I want to thank everybody for joining us today. And I want to join Howard and everyone else in the room here and wishing you a happy holidays. And again, if you have further questions, don't hesitate to give us a call. Thank you.

Thank you, ladies and gentlemen, and this concludes today's conference call. Thank you for participating, and you may now disconnect.