* Cash-and-stock deal valued at 628 pence per share
* Anti-trust concerns hold back share price
* Ball to remain U.S. domiciled for tax (Adds Ball and analyst comments, context, updates shares)
By Esha Vaish and Roshni Menon
Feb 19 (Reuters) - U.S. drinks can maker Ball Corp agreed to buy British rival Rexam Plc in a sweetened4.43 billion pounds ($6.9 billion) deal, creating an industrygiant that can better manage capital spending and costs asaluminium premiums rise.
The cash-and-stock deal would merge the world's two largestbeverage can makers by volume into a combined entity that couldserve as a single supplier to customers across diverse markets.
It would also reduce warehousing and transport costs for thecan makers, which are contending with record-high premiums, thesurcharge they must pay to traders on top of cash metal pricesto obtain aluminium.
"If you want global supply and global prices, you need aRexam plus Ball, because neither Rexam nor Ball individually areglobal," said Jefferies & Co analyst Sandy Morris.
Shares of Rexam, which makes cans for Coca-Cola Co and Anheuser-Busch InBev SA, rose more than 6 percentto 571.5 pence in early trading before falling back, and weresignificantly below the indicated price of 628 pence per share.
Though analysts said the offer price was fair givenchallenges in the global packaging industry, they said antitrustconcerns were limiting stock gains. Ball shares fell about 2percent.
"As there are so many regulatory approvals required for sucha merger to go through, I think the market is discounting theprobability of it happening," said Thomas Picherit of researchfirm AlphaValue.
GLOBAL MARKET
Rexam and Ball each control slightly more than a fifth ofthe global market. Their nearest competitor, Crown Holdings Inc, has a 19 percent share, according to Vertical ResearchPartners.
Together, Rexam and Ball account for 60 percent of beveragecan supply in North America, 69 percent in Europe and 74 percentin Brazil, according to Morningstar analysts.
If regulators demand the divestment of assets, Crown wouldbe the front runner to buy them, three analysts said. Crowncould not immediately be reached for comment.
But Rexam Chief Executive Graham Chipchase said he did notexpect the deal to encounter any significant regulatory hurdles.
"If you look at the two businesses combined, there's a verycomplementary footprint," he said on a media call. "There's notas much overlap as you might think."
Rexam, which on Thursday reported lower 2014 sales, has abig presence in Scandinavia, Russia and India. Ball has a strongfoothold in China.
Ball can walk away from the deal if required to divestassets that generate sales of more than $1.58 billion, but thecompany would have to pay a break-up fee of about 300 millionpounds, roughly 7 percent of the deal value.
Ball executives, speaking on a different conference call,said it was premature to assume divestments would be required.The company said it expects clearance by the first half of 2016.
Broomfield, Colorado-based Ball said it expects the deal toresult in synergies of $300 million by 2018.
The company will finance the deal, which values Rexam at$8.4 billion including debt, using a 3.3 billion pounds bridgeloan, a $3 billion revolving credit facility and $2.2 billion ofnew equity.
Ratings agency Moody's said this month that a debt-financeddeal could result in downgrades for Ball's $3.8 billion of rateddebt.
Ball, a company started by five brothers in 1880, retainedAxinn, Veltrop and Harkrider as lead antitrust advisors on thedeal.
Rexam shareholders will get 407 pence in cash and 0.04568new Ball shares for each Rexam share held. Rexam shareholderswill own about 19 percent of Ball's shares.
Ball said it would remain domiciled in the United States,shunning the tax inversion model in vogue last year, when somebig U.S. companies bought out UK-listed firms to try and lowertheir corporate tax payments.
Greenhill, Deutsche Bank and Goldman Sachs were financialadvisers to Ball. Rothschild, Barclays, Credit Suisse andMerrill Lynch International were Rexam's advisers.
Skadden, Arps, Slate, Meagher & Flom was lead legal adviserto Ball, while Freshfields Bruckhaus Deringer LLP advised Rexam. (Editing by Gopakumar Warrier and Vincent Baby)
