Amcor offers $2 billion for Rio packager

       Amcor Ltd of Australia offered yesterday to buy part of Rio Tinto Group's Alcan unit for US$2.03 billion to become the biggest supplier of drug packaging.
       Amcor will get the global pharmaceuticals and tobacco packaging units as well as the Asian and European food businesses Rio acquired in its US$38 billion takeover of Alcan Inc in 2007.
       "The offer will be funded by a A$1.6 billion (US$1.3 billion) share sale and bank debt," Amcor said in a statement.
       The takeover, Amcor's biggest, will boost sales 50% and may arrest two years of declining profit. It will make Amcor the world's largest supplier of packaging to the pharmaceutical, healthcare and personal-care industries, and the biggest supplier for tobacco in Europe, according to Deutsche Bank AG.
       "Amcor is paying between 5.5 and 5.7 times the units adjusted earnings before interest, tax, depreciation and amortisation for the past 12 months,"managing director Ken Mackenzie said.
       Bemis Co paid 6.7 times earnings before interest, tax, depreciation and amortisation for Rio's Food Americas business last month.
       "It's a pretty good price," said Jason Beddow, chief investment officer at Argo Investments Ltd, an Adelaide-based investment company."Everyone's always talked that packaging needs further consolidation; that's structurally probably a positive as well."
       "Now is the right time in the economic cycle to be making acquisitions as asset values are substantially lower than they have been for many years," Mackenzie said.
       The company's previous biggest purchase was the $1.5 billion takeover of the PET bottling and container lid business of Germany's Schmalbach-Lubeca AG in 2002.
       "London-based Rio has agreed to a period of exclusivity with Amcor and will respond to the offer after consulting with the relevant European works councils," the company said.
       "Amcor's offer is in the interests of all stakeholders," Rio's chief financial officer Guy Elliot said."The company is seeking to sell non-mining assets to cut debt that ballooned 19-fold after it bought Alcan."
       Rio has also raised $2.5 billion this year from selling iron ore and potash assets in Latin America, a US coal mine and a share in a Chinese aluminium smelter. It has had $6.6 billion of asset sales in the last 18 months.
       Amcor will add T.G.I. Friday's Skillet Meals and Sheba petfood to its existing packaging products, which include the packaging for Fishermans Friend throat lozenges and Gatorade sports drinks. It manufactures cans, plastic bags, icecream wrappers and sterile surgical instrument trays.
       "Alcan Packaging remains the most obvious solution to Amcor's growth challenge, given the neat strategic and growth aspects that it would bring," Royal Bank of Scotland Group Plc analysts wrote in a note on Monday.
       Amcor is the world's largest producer of PET packaging and the unit accounted for 34% of sales in the year ended June 30. The flexibles unit, which manufactures packaging for food, hospital sterilisation units and tobacco, was the second biggest earner in the year.
       The acquisition requires approval from anti-trust and competition authorities in the US and the EU.