* Sale to U.S. firm Bemis Co includes at least $1 bln cash
* Sources says Amcor still in race for other assets
* Rio shares down in weak metals market, Bemis shares gain (Recasts, adds analyst's comment, updates share prices)
By Denny Thomas and Euan Rocha
SYDNEY/TORONTO, July 6 (Reuters) - Global miner Rio Tinto
Rio Tinto, which only last week raised $15.2 billion in one of the world's biggest rights issues, will sell its Americas flexible packaging assets to U.S.-based Bemis for $1 billion cash, with the rest in equity.
"The transaction multiple is reasonable, with Bemis dramatically increasing its critical mass," said Ghansham Panjabi, an analyst with Robert W. Baird & Co.
"But, more importantly, this will act as a lightning rod for further consolidation in the (packaging) industry."
The deal moves Rio Tinto closer to the day when it can draw a line under its near-disastrous 2007 acquisition of Canadian aluminum and packaging firm Alcan. Bought near the height of the commodities boom, Alcan left Rio Tinto with $38 billion in debt. Rio Tinto had hoped to repay some of the debt by quickly selling the packaging assets, but the global financial crisis delayed that plan as asset prices tumbled.
Rio Tinto said Alcan's remaining non-aluminum assets were still on the auction block, with their book value likely to be written down ahead of their sale.
Separately, sources told Reuters that Australian packaging
group Amcor Ltd
An Amcor spokesman declined to comment.
"Any packaging assets that Rio is getting rid of on its balance sheet is good and will be liked by the market," Olivia Ker, research analyst at Merrill Lynch, said after the news. Monday's announcement takes Rio's expected proceeds from asset sales this year to $3.7 billion, and analysts say Rio would be encouraged to sell other noncore assets in the coming days.
"The rest of the packaging business is certainly on the cards, the rest of the coal division is still on the cards," Ker added.
Rio Tinto shares fell nearly 5 percent in London to 1,925 pence by 1430 GMT, in line with a weaker UK mining index <.FTNMX1770>, which was hit by a slide in metals prices. Bemis shares rose 3.9 percent to $25.23 on the New York Stock Exchange in early trade.
'SOLID VALUE'
"The sale of the Food Americas division is the first significant step in reducing the asset portfolio acquired with Alcan," Rio Tinto Chief Financial Officer Guy Elliott said in a statement. "The transaction represents solid value given the challenging financial environment."
Rio Tinto recently opted in favor of the rights issue and a
tie-up with rival BHP Billiton
Analyst Michael Rawlinson at Liberum Capital in London said the price for Food Americas was decent. "We believe the market has been expecting $2-$3 billion for the entire Alcan packaging business, therefore we consider the price Rio has received for U.S. food packaging stand-alone looks attractive."
The assets being sold by Rio include 23 facilities, more than 90 percent of which are located in the United States, Canada and Mexico. The business posted 2008 sales of more than $1.5 billion.
The deal, which is expected to close by the end of 2009, will generate annualized savings of $65 million for Bemis and boost the company's earnings per share beginning in 2010.
"Net, net, despite the modest equity issuance, we believe that the considerable increase in critical mass post transaction for Bemis, and related synergy story will push its shares higher," Panjabi said.
($1=$1.26 Australian) (Additional reporting by Eric Onstad in London: editing by Peter Galloway)