Rio's $5 bln packaging unit draws interest-sources

By Michael Erman and Megan Davies

NEW YORK, Sept 8 (Reuters) - Private equity and strategic buyers are vying for Anglo-Australian mining giant Rio Tinto Plc's (RIO.L)(RIO.AX) $5 billion 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 Ltd (AMC.AX) and U.S. packager Bemis Co (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 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 Sept. 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.

Rio Chief Financial Officer Guy Elliott said late last month that sales processes are underway for all the assets it has disclosed it could sell.

"There is a long list of buyers for all the key assets, and we remain on track to announce $10 billion of divestments for the full year," he said at the company's earnings presentation.

"In all of our divestments we are determined that we will only enter into a transaction at the right price. Value remains our primary consideration."

Alcan Packaging could be a good fit for either Amcor or Bemis, both of which have said they would consider expanding in flexible packaging.

Amcor Chief Executive Ken MacKenzie said last month the company was on the lookout for acquisitions, and its focus would remain custom plastic bottles, flexibles and tobacco packaging.

"We clearly have the capability to use the balance sheet to fund growth initiatives, either organic or acquisitions," MacKenzie told reporters at a results briefing last month.

Rio is pursing a dual-track process for offloading the Energy America unit, filing for a possible initial public offering as well as trying to auction it. Potential buyers are currently doing due diligence, a source said.

Rio has rejected an all-share takeover offer worth around $170 billion from rival BHP Billiton Ltd (BHP.AX).

Rio, Bemis and Amcor were not immediately available for comment. Bain and Apollo both declined comment. (Additional reporting by Sonali Paul in Melbourne; editing by Jeffrey Benkoe)