Rio Tinto to Sell off its Alcan Packaging Assets

Submitted by Jim Thesiger on 7 July, 2009 - 06:30

Yesterday Rio Tinto (RIO) has made an announcement that it is about to sell off the Food Americas division of the Alcan Packaging business to Bemis for 1.2 billion US dollars among which 200 million will be paid in the form of Bemis stocks. The Food Americas division of Alcan has generated around 1.5 billion US dollars in 2008 with an earning of 166 million US dollars before Tax, depreciation, amortization and interest. Rio’s decision was welcomed by many experts as they consider this as a positive move made by the company to reduce its debt levels.

The decision was made within a week after Rio Tinto generated around 15.2 billion US dollars through rights issue. It is to be mentioned that the Food Americas operation was about a quarter (23 percent) of the entire Alcan Packaging business that had a net value of around 3 billion US dollars. Rio took the decision of selling its packaging business in 2007 in order to reduce its 40 billion US dollar debt that was added to its profile since the company took over Alcan.

Amcors’s interest on Alcan assets

Amcor is one of the companies that showed keen interest on buying a portion of the Alcan packaging business and is still considering buying the Asian and European Food, Pharmaceuticals and Tobacco packaging assets. It is assumed that Rio might consider reducing the carrying value of the rest of the Alcan packaging business assets after it goes through further review.

According Rio Tinto’s spokesperson, the company is expecting that the beauty business, which is accounted for 14 percent of the Alcan business, might get sold on its own. However, Amcor hasn’t showed any interest to buy this division. Yesterday in the stock exchange Amcor shares saw a rise of 4 percent while Rio Tinto stocks went down for $1.10.

Rio Tinto launched its non-core property sales program to deal with the debts regarding the Alcan business but had to struggle badly to gain the attention of its targeted buyers as the global financial crisis forced many potential investors to step down from bidding.