Rio collects $2bn for aluminium division

Rio Tinto has finally sold its aluminium packaging division in a $2 billion deal that will enable the Anglo-Australian miner to reduce further its huge debt burden. Amcor, an Australian company, has agreed to buy the Paris-based division, which makes packaging for food, drugs and cosmetics, for $2.025 billion (?1.22 billion). The sale brings Rio’s total divestments to $8.8 billion in the past 18 months, with an additional $1 billion to $1.5 billion to come from the flotation of its American energy assets. Rio launched its divestment strategy two years ago as part of its plan to reduce the $40 billion of debt that it took on to buy Alcan, the Canadian aluminium producer. The packaging operations, which Rio inherited as part of the Alcan purchase, were considered to be the least important for a miner and, therefore, the highest priority for disposal. Tom Albanese, Rio’s chief executive, has admitted that the company held on too long for a high price and that the sale was derailed by the credit crunch. Charles Kernot, mining analyst at Evolution Securities, said: “For a dig-and-deliver mining company, the packaging assets acquired as part of the Alcan acquisition were always an incongruous part of the expanded group. The global downturn and Rio Tinto’s exposed financial position exacerbated the difficulty of achieving a respectable price for the assets.” Rio said last week that it would sell its American packaging division to Bemis, based in Wisconsin, for $1.2 billion and Amcor is buying the European and Asian assets. Rio has also raised $15.2 billion in a rights issue and the combination of capital-raising and disposals should cut the company’s debt in half to $20 billion. Guy Elliott, Rio’s chief financial officer, said: “We believe Amcor’s offer is in the interests of all stakeholders. These businesses would be acquired by a leading player in the global packaging sector that is well placed to enable ongoing success of the businesses.” Analysts said that the price Rio had achieved for its European and US packaging businesses was good, given the continued weakness in financial markets. Peter Davey, mining analyst at Ambrian, said: “After a very difficult 12 months, Rio Tinto’s balance sheet is finally looking much healthier, not least due to the injection of $15 billion of new shareholder money in June.” The sale of Alcan Packaging is subject to Amcor raising A$1.6 billion (?796 million) in a rights issue. The Alcan division sold yesterday employs about 14,000 people and had revenues of $4.1 billion last year. Rio’s shares rose 37p to ?22.82 after the sale of the packaging division. The sale comes as Rio prepares to announce its half-year results tomorrow. The miner is expected to reveal that its underlying profits have fallen by about 60 per cent to $2 billion as a result of a collapse in metal prices. The company raised $2.9 billion from disposals last year and $5.7 billion this year. Among the assets sold were the Greens Greek mine in Alaska for $750 million and the Jacobs Ranch coalmine in Wyoming for $761 million. It also sold its Brazilian iron ore operations for $1.6 billion and the Kintyre uranium project in Australia for $495 million. It continues to seek buyers for other assets, including an aluminium beauty packaging division and Alcan Engineered Products. source:business.timesonline.co.uk