Australia's Amcor eyes part of Rio packaging unit

SYDNEY (Reuters) - Australian packaging firm Amcor Ltd (AMC.AX) is in talks to acquire part of Rio Tinto Ltd's (RIO.AX) (RIO.L) Alcan packaging unit, the third suitor for Rio assets to emerge this week as the miner looks to pay off debt.

Amcor said in a statement to the Australian Stock Exchange the discussions were incomplete. It did not give any further details of the talks.

Rio hopes to pay off about $10 billion of debt this year by cutting costs, axing 14,000 jobs, and selling businesses. So far, it has sold or is selling around $4.7 billion worth of assets.

It also is considering other options to generate cash, including an equity raising.

Rio is also in talks to sell unidentified assets to its largest shareholder, Chinese aluminum group Chinalco, and this week sold potash operations to Brazil's Vale (VALE5.SA).

The packaging business, worth more than $5 billion in September, is one of the world's largest producers of flexible food packaging. It is also involved in pharmaceutical, make-up and tobacco packaging.

Headquartered in Paris, it has about 31,000 employees in three dozen countries.

Rio has made no secret of its desire to jettison the division, which was placed on the block shortly after Rio acquired Alcan for $38 billion at the height of the commodities boom in late 2007.

But the sale of assets has gained urgency since commodities markets collapsed in mid-2008, reducing cash flows.

Analysts said without a clear idea of what part of the division Amcor was considering, measuring how much dent a sale could make in Rio's debt was difficult.

"Visibility on the division has been rather poor since Rio listed it for sale," said an analyst familiar with Amcor who declined to be identified as he is not authorized to speak to media.

"Rio has said very little about the division's performance, but I doubt Amcor would want to stretch its balance books too much right now," he said.

Amcor has a market value of $2.6 billion and derives about 80 percent of its earnings outside of Australia.

(Reporting by James Regan)