published on 14/10/08
Aluminium giant Rio Tinto Alcan is poised to sell its £2.5bn packaging arm, which it could divide up to attract more buyers.
Rio Tinto said last year that it could sell the packaging business, which it purchased in its £19bn takeover of Montreal-based Alcan, to help ward off a £70bn bid from rival BHP Billiton.

Reports in the Daily Telegraph last weekend suggested that investment bank Morgan Stanley had been appointed to find a buyer for the business and would break it up to make it easier for private equity buyers to seal a deal.

Nicholas Mockett, partner at Europa Partners, said a break-up would make sense because the packaging business covered disparate areas that would appeal to various suitors.

'Not only that, but bite-size chunks of companies will be easier to acquire for trade or private equity, all of whom will find acquisition finance relatively difficult to secure and expensive,' he said.

Raising equity at this time would also be undesirable as the depressed trading multiples meant new paper was expensive to issue, he added.

It is thought that Rio Tinto came close to selling the packaging division to Sealed Air, the protective packaging specialist, last year.

Bemis, the Minneapolis-based producer of flexible packaging and pressure-sensitive labels, and Essel Propack, the Indian packaging group that owns Arista Tubes and Telcon Packaging in the UK, were also tipped as potential buyers.

However, the Sealed Air deal is said to have collapsed at the last moment and was further hampered by the credit crunch, which made it difficult for private equity buyers to fund a transaction.

Alcan Packaging provides plastic, aluminium, paper, paperboard and glass packaging to the food and beverage, pharmaceutical and medical, beauty and tobacco industries. It has a turnover of $6.2bn, with food and beverage accounting for 63% of sales.

The firm has five UK plants providing packaging to a number of blue-chip clients, including PepsiCo, Nestlé and Walkers.

Read the full article at Packaging News