Anglo not planning to restart Tarmac sale -source

LONDON, July 28 (Reuters) - Miner Anglo American Plc, fending off a merger proposal from rival Xstrata Plc (XTA.L), is not planning to restart the stalled sale of its Tarmac business, a person familiar with the matter said on Tuesday.

Although there is interest in the heavy building materials division, a sale would still attract low valuations and suffer because private equity firms have limited access to leverage, the person said -- reasons that originally led to it being shelved in early 2008.

On Sunday weekly newspaper the Observer, citing "City sources", said incoming chairman John Parker would order Anglo to accelerate plans to dispose of assets including Tarmac, which had drawn interest from private equity firms.

Anglo (AAL.L) put Tarmac up for sale in August 2007 but halted the sale months later and said it would not restart it until credit markets improved.

"Tarmac remains non-core to Anglo and continues to be managed to maximise shareholder value," Anglo spokesman James Wyatt-Tilby said, declining to comment on reports that the Tarmac sale process was being revived.

The Observer said the unit had interested buyout houses such as CVC [CVC.UL], Cinven [CINV.UL] and Doughty Hanson [DOUHA.UL]. A second person familiar with the matter said Tarmac's original sale had also interested TPG [TPG.UL]. (Reporting by Quentin Webb and Eric Onstad; Editing by Greg Mahlich)