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Why Rio Tinto sells Alcan Packaging to Amcor?
By Amarendra Bhushan for CEOWORLD Magazine Updated:August 18, 2009
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Australian packaging group Amcor will acquire Alcan Packaging businesses including global pharmaceuticals, tobacco and European and Asian food divisions for $2bn (£1.2bn). The deal will transform Amcor will into one of the world’s largest packaging companies.
Amcor plans to help fund the deal via a A$1.6bn equity raising led by Deutsche Bank, UBS, Bank of America Merrill Lynch, JPMorgan and CommSec, Australia’s largest retail broker.
Rio last month agreed to sell Alcan Packaging Food Americas to Bemis of the US for $1.2bn.
It marks Amcor’s first big buy under Chief Executive Ken MacKenzie, efforts to pay down $38 billion in debt.
Alcan packaging has about 14,000 staff at 80 locations in 28 countries, with pharmaceuticals, tobacco, European food and Asian food divisions. It turned over $4.1 billion last year.
Rio Tinto acquired the packaging businesses when it purchased aluminium giant Alcan. The purchase was made at the height of the commodities boom and saw Rio Tinto’s debt peak at just under $50 billion.
In June, Rio Tinto raised $15 billion through a rights issue, reducing its debt to $23.2 billion. It has also sold off $6.6 billion in assets over the past 18 months.
The sale is the latest in a series of moves to shrink its debts. In the last 18 months, the Anglo-Australian group has sold assets worth $6.6 billion. Rio initially turned to a tie-up with China’s Chinalco to boost its balance sheet, but was forced to abandon the controversial deal after rising political opposition in Australia.
The miner instead turned to a cash call, tapping investors for $15.2 billion in July — the world’s fifth largest rights issue ever. After the cash call, Rio said that its debts would be reduced to $23.2 billion.
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