Rio's packaging unit draws interest

By Michael Erman and Megan Davies

NEW YORK (Reuters) - Private equity and strategic buyers are vying for Anglo-Australian mining giant Rio Tinto's (RIO.L)(RIO.AX) $5 billion (2.84 billion pounds) packaging business, according to sources familiar with the situation.

Interested bidders include private equity firms Apollo Global Management and Bain Capital as well as Australian packaging group Amcor (AMC.AX) and U.S. packager Bemis (BMS.N), the sources said.

While the unit, one of the world's largest producers of flexible food packaging, may appeal to private equity bidders, the size of the asset could make it a difficult deal to clinch amid the financing drought.

Rio is trying to unload the business after acquiring it as part of the takeover of aluminium producer Alcan last year. The auction is being run by Morgan Stanley (MS.N), sources said.

Rio is looking to raise $15 billion or more from asset sales to lower its debt load after taking on $40 billion in debt to buy Alcan. It is also trying to sell other assets, such as its engineered products business and its North American coal unit, Energy America.

The second round of bidding for the packaging division is expected to close on September 30, one industry source said, but might be delayed.

Analysts estimated the unit, which also is involved in pharmaceutical, beauty and tobacco packaging, could be worth more than $5 billion.

The business, which generates around $6 billion in revenue a year, is headquartered in Paris and has 31,000 employees in 129 sites around the world.