Rio sells Alcan unit to Platinum

RIO Tinto has made a small step towards the sale of Alcan's engineered products division, taking on its first private equity partner by selling a controlling stake in the cable unit to Platinum Equity. The cable unit is one of the smaller of seven in the engineered products division, with the amount that will be received by Rio deemed too small to announce. Rio has been unsuccessfully trying to sell its engineered products unit since the ill-fated $US38 billion acquisition of Alcan in 2007 that saw its debt rise to roughly that level. Although the acquisition has been condemned by shareholders and analysts, chief executive Tom Albanese has said his only regret about the purchase was that the company did not move quicker to sell the parts of Alcan it did not want before the global financial crisis. The massive debt burden was relieved recently through a $US15.2bn rights issue forced by shareholders unhappy with Rio's $US19.5bn deal with Chinalco. That deal, inked in the depths of the financial crisis, would have seen the Chinese state-owned aluminium giant double its stake in Rio to 18 per cent and take interests in Rio's best assets. Rio said the private equity deal was expected to close in a few weeks, subject to various undisclosed conditions. "This (the sale) offers a good solution to Rio Tinto as we will be able to step back from day-to-day management of the business but retain an economic interest in its recovery as market conditions improve," chief financial officer Guy Elliott said. Rio would not say whether it would hold its stake in the cable unit if Platinum Equity floated the business. The cable unit has seven factories in the US, Canada and China, selling cables for the power and construction industries. Last month, Rio confirmed it had finally agreed to sell the Alcan packaging business to Amcor in a $2.4bn deal. Freezing credit markets during 2008 made Rio unable to come close to its target of $US10bn of asset sales in that year and $US15bn all up. Instead, the company has sold $US6.6bn of assets in the past 18 months.