Disposal of Alcan units on the table, analysts say

Alcan's final exit from a multi-billion-dollar bauxite and alumina project in India is turning the spotlight on other disposals it may make following the planned $38.1-billion (U.S.) takeover by Rio Tinto Group. Alcan has already reached a deal to sell its specialized packaging unit with annual revenue of about $6 billion U.S., 31,000 employees and more than 100 plants in Canada, the United States and 30 other countries, analysts said yesterday, mentioning a value of $6 billion U.S. Alcan would not comment, except to say it has had approaches from several interested parties. It insisted the packaging group will be sold in one piece and not broken up. "I'd be surprised if the deal has not already been done on the basis that Rio will get all the approvals needed," said veteran U.S. analyst Charles Bradford. "The unit is a candidate for a strategic buyer or buyout fund. It could bear more debt if an equity buyer moved in." Making packaging for cigarettes to high-value cosmetics is a highly competitive business, he said, but the Alcan unit "might fetch $6 billion U.S. realistically." Packaging is one of Alcan's four business groups, along with raw materials, smelting and engineered products. It is the prospect of an eventual breakup by the buyer that worries Canadian employees, including more than 400 in the Montreal area. Analysts also said Alcan's cable, alloy and several other smaller businesses may go, but it will keep the core of the engineered products group, including the aerospace products in Europe and the U.S., because of strong demand and good margins. There was also speculation about what Rio Tinto itself may plan to unload to reduce the heavy debt it will incur for the all-cash takeover of Alcan. It will keep its key North American industrial minerals operations and the profitable QIT ductile iron and titanium oxide plant near Sorel, analysts said. It will also keep Iron Ore Co. of Canada, the country's biggest iron ore producer.