Rio Tinto sells Alcan packaging unit for $1.2 billion

After having successfully raised $15.2-billion through a rights issue last week, the world's third-largest diversified mining company, Rio Tinto, (See: Rio Tinto pulls a coup with rights issue) yesterday signed an agreement to sell its Alcan Packaging Food Americas division to Bemis Company for $1.2 billion in order to reduce its $38.7 billion debt. 

Wisconsin-based Bemis will pay Rio Tinto $1 billion in cash and $200 million of its shares to acquire the Chicago-based Food Americas division of Alcan Packaging.

The operations of the divested division generated revenues of $1.5 billion for Alcan Packaging in 2008, accounting for 23 per cent of it's total revenues through 23 locations in the US, Canada, Mexico, Brazil, Argentina and New Zealand.

The London-based Rio miner had acquired Canadian aluminium group Alcan Inc for $38.1 billion at $101 for per share in July 2007. (See: Update: Alcan to merge with Rio Tinto under $38.1 billion deal) 

A massive debt of $42 billion to fund the Alcan acquisition at the height of the commodities boom that had pushed up mining shares, the acquisition virtually brought Rio to its knees, forcing it in December to slash $5 billion in expenses and speed up asset sales as part of an aggressive cost-cutting campaign to reduce debt by $10 billion by the end of 2009. (See: Major shake up at Rio Tinto to reduce debt  / Rio Tinto to sell assets to pay $42-billion debt)

In December, Rio Tinto said that it would axe more than 14,000 jobs globally and in January, Alcan in Canada announced that it would shed 1,100 jobs, reduce aluminum production by 25 per cent at its big Vaudreuil alumina plant in the Saguenay and permanently shut down its aging Beauharnois smelter near Montreal, in theaftermath of a staggering collapse in demand for aluminum globally. (See: Rio Tinto Alcan to shed 1,100 jobs, cut production and close plant) 

During 2009, the miner sold assets worth $3.7 billion. It sold its interest in the Ningxia aluminium smelter in China for $125 million, its potash assets and Brazilian iron ore operations for $1.6 billion and its Jacobs Ranch coal mine in the US for $761 million. (See: Rio Tinto sells US mine for $761 million / Rio may sell stakes in key projects to China to shed debt)