Rio Tinto offloads Alcan unit for $1.2bn

MELBOURNE: Mining giant Rio Tinto on Monday announced the 1.2 billion US dollar sale of Alcan's American food packaging arm to US firm Bemis as it offloads assets to pay off its big debts.

The Anglo-American miner said it would receive cash and up to 200 million dollars in Bemis shares under the deal for Alcan Food Americas, which is still subject to regulatory approval.

Rio borrowed heavily to fund its 38.1 billion US dollar takeover of Canadian aluminium group Alcan in 2007 and is selling non-core assets to reduce its debt burden.

Last week, Rio also confirmed a huge take-up of its 15.2 billion US dollar rights issue, the fifth largest in history, allowing it to further slash its debt.

"The sale of the Food Americas division is the first significant step in reducing the asset portfolio acquired with Alcan," Rio's chief financial officer Guy Elliott said in a statement.

"The transaction represents solid value given the challenging financial environment."

Rio said the Chicago-based Food Americas had 4,300 employees in the United States, Canada, Mexico, Brazil, Argentina and New Zealand, generating 1.5 billion US dollars in revenues last year.

It said the deal brought the total raised from asset sales this year to 3.7 billion US dollars, adding that the rest of Alcan Packaging and Alcan's Engineered Products division would also be put on the market.

Analysts at Citi estimated the remaining packaging assets could fetch two billion US dollars, Dow Jones Newswires reported.

Wisconsin-based Bemis specialises in packaging, employing almost 16,000 people in 11 countries globally and generating sales of 3.8 billion US in 2008.

Rio last month opted for the rights issue and an iron ore joint venture with BHP Billiton in preference to a 19.5 billion US dollar cash injection agreed with China's Chinalco, following a recovery in commodities prices.

Rio Tinto shares closed down 2.2 percent at 48.50 dollars (38.48 US) on the Australian stock exchange, which was down 1.16 percent overall.