Rio sells assets to pay off debts

Rio Tinto has been hit by falling commodity prices

Giant mining firm Rio Tinto has agreed to sell its Alcan Food Americas division for $1.2bn (£739.3m) to US company Bemis, to pay large debts.

Rio Rinto is seeking to reduce the $38bn of debt it took on to buy the Canadian aluminium group Alcan in 2007.

The move comes after the firm raised $15.2bn in a rights issue recently.

Some of Rio Tinto's debt was meant to be paid off by selling Alcan's packing assets fast, but the global recession thwarted its plans.

"Any packaging that Rio is getting rid of [from] its balance sheet is good and will be liked by the market," said Olviia Ker, analyst with Merrill Lynch.

Rio Tinto's financial officer Guy Elliot added that the sale of the Food Americas arm was the first "significant step in reducing the asset portfolio acquired with Alcan".

Under Rio Tinto's plan to sell its American food-packaging assets, Bemis will acquire 23 packaging plants in the US, Canada, Mexico, Brazil, Argentina and New Zealand.

Chinese plan

In February, the Anglo-Australian firm announced that it would be receiving a $19.5bn investment from China's Chinalco, which would have increased its stake in Rio to 18% from 9%.

But in June, Rio Tinto said it was abandoning the deal with Chinalco, preferring instead to join with competitor BHP Billiton. It also announced plans to raise funds from investors.

Chinalco remains Rio's biggest shareholder and the Chinese firm recently took up its full entitlement of new shares in the rights issue.