Rio Tinto to sell Alcan packaging to Amcor for $2bn

Rio Tinto is set to sell its Alcan packaging business to Australia's Amcor for $2bn (£1.2bn) as the miner continues the divestment programme stalled by the global credit crunch.

The deal – which includes the group's European food and global tobacco and pharmaceutical packaging units – follows last month's sale of Alcan's US food packaging business to Bemis for $1.2bn. Both are part of Rio Tinto's plans to pay down the $38bn debt pile accrued from its top of the market takeover of Alcan in 2007.

The vast debt became a major problem for Rio Tinto when global recession hammered commodity markets last autumn. Difficulties selling off non-core Alcan businesses, such as packaging, made the situation even worse. First, last November, BHP Billiton retracted its hostile takeover bid and walked away. Rio Tinto's management – faced with $8.9bn of debt repayments looming this year, and another $10bn next – then brokered a $19.5bn tie-up with China's state-owned Chinalco to help plug the gap. But shareholder wariness, combined with fortuitously rising commodity prices, put paid to the proposal in May. Instead, Rio raised $15.2bn in a rights issue in June.

As well as the Alcan divestments, this year so far Rio Tinto has also sold its interest in the Ningxia aluminium smelter for $125m, its potash and Brazilian iron ore assets for $1.6bn, and a US coal mine for $761m. Rio Tinto has agreed a period of exclusivity with Amcor, after which it will respond to the offer. Meanwhile, other assets also remain on the market, including Alcan's beauty packaging unit and its engineered products division.

Guy Elliott, the Rio Tinto chief financial officer, said: "We have already agreed to asset sales of $6.6bn over the last 18 months, despite the challenging financial markets. We believe Amcor's offer is in the interests of all stakeholders."

Meanwhile, Rio Tinto remains mired in controversy in China after four of its employees were formally charged with bribery and stealing commercial secrets by the authorities in Shanghai last week. The four, including the Australian Stern Hu, have been in custody since July, and Mr Hu faces seven years in prison. Rio Tinto has consistently denied that its employees were involved in any wrongdoing.

The fracas comes against the backdrop of increasingly acrimonious negotiations over bulk iron ore contracts. China has repeatedly rejected the 33 per cent price cut agreed between Japan's steel mills and the big three suppliers, Rio Tinto, BHP Billiton and Vale. But this week's 35 per cent reduction agreed between China and Australia's Fortescue Metal suggests a softer stance than the 45 per cent price cut China has demanded to date.