Rio Sells Assets

  Rio Tinto has made the first major sale of an asset from its Alcan aluminium business.The debt reducing miner yesterday said it had sold & #160;a division of Alcan for & #36;US1.2 billion ( & #36;A1.5 billion) to raise cash to pay down debt and improve its & #160;balance sheet.News of the sale (which needs US regulatory approval) came a couple of days after Rio revealed that it had raised over & #36;US15 billion in its rights issue to shareholders.The asses included in & #160;the disposal were & #160;the & #160;Alcan Packaging Food Americas unit which was sold to US group, to Bemis Company for & #36;US1.2 billion, Rio Tinto said. The operations include 23 facilities in the US, Canada, Mexico, Brazil, Argentina and New Zealand.The Alcan & #160;may include & #36;US200 million in Bemis shares.So far this year, & #160;Rio & #160;has announced a total of & #36;US3.7 billion of divestments.It has already announced its interest in the Ningxia aluminium smelter in China has been sold for & #36;US125 million, its potash assets and Brazilian iron ore operations for & #36;US1.6 billion and its Jacobs Ranch coal mine in the United States for & #36;US761 million. & #160;That last sale is under examination by US competition regulators who have asked for more information.On its website Bemis said: & quot;For the year ended December 31, 2008, Alcan Packaging Food Americas recorded net sales of & #36;1.5 billion and adjusted EBITDA of approximately & #36;166 million. & quot;The purchase price represents an adjusted EBITDA multiple of approximately 6.7 times when taking into account the estimated & #36;100 million of tax benefits related to the structuring of much of the transaction as a purchase of assets. & quot;Further adjusting the valuation for estimated annual run-rate synergies of & #36;65 million results in an adjusted EBITDA multiple of approximately 4.8 times. & quot;The transaction is expected to close by the end of 2009, subject to customary closing conditions and regulatory review. & quot;Bemis said the purchase & #160;would see its & #160; & quot;pro forma 2008 net sales increase 40 percent to approximately & #36;5.3 billion, with the percentage of net sales to the resilient food packaging space increasing from 57 percent to approximately 70 percent of total Bemis net sales. & #160; & quot;The transaction also adds nearly 4,600 employees to Bemis' global workforce for a total of over 20,000 employees at 84 manufacturing locations worldwide. & quot;The purchase of Alcan, for & #36;US38 billion in mid 2007, landed & #160;Rio Tinto with huge debts which it has struggled to cut. & #160;The romance with Chinalco of China was designed tor raise enough cash (US19 billion) to pay down debt, and money was to come from asset sales, which have been slow to emerge.Rio identified Alcan's packaging and engineered products divisions for divestment and there was a lot of talk in the market that Amcor is still interested in purchasing some or all of them.Rio also said in yesterday's statement that it was & #160;also planning to review the book value of its Alcan packaging division, a move that is likely to see a cut in the carrying value of those assets. & quot;Following this sale, as part of the 2009 half-year reporting process, the Group will review the carrying value of the remaining Alcan Packaging business, which are expected to remain classified as assets held for sale in the Group's interim financial statements. & quot;The Group's current expectation is that this review may result in some downward revision, the extent of which will be determined and announced in conjunction with the Group's 2009 half-year results announcement. & quot;They are due next month. & #160; & quot;The sale of the Food Americas division is the first significant step in reducing the asset portfolio acquired with Alcan, & quot; said Guy Elliott, chief financial officer, Rio Tinto. & quot;The transaction represents solid value given the challenging financial environment.The divestment program continues for other assets identified for sale, including the remainder of Alcan Packaging and Alcan Engineered Products.Rio shares fell & #36;1.10 to & #36;48.50 as some investors sold the shares they picked up in the discounted rights issue last week. & #160;  

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