December 02, 2008

Essel and Ess Dee Aluminum join global race for Rio Tinto unit

It is reported that two Indian companies namely Essel Propack and Ess Dee Aluminum have joined a global race to acquire the packaging unit of Rio Tinto Alcan, who would sell the USD 5 billion packaging business as part of a move to focus on core areas.

Essel and Ess Dee are joining hands to share the financial burden of bidding for this large unit, the personal care and pharmaceutical packaging units alone have combined revenue of around USD 1 billion or INR 4,000 crore. The joint bid is also being planned so that the 2 companies may split Rio Tinto’s unit subsequently, to merge with their own areas of operations.

Morgan Stanley, the financial advisor to Rio Tinto, had suggested dividing the packaging unit to make it easier for interested companies and private equity firms to bid. Buyers could more likely be keen if the packaging division is broken up and offered for sale as smaller entities, the advisor is reported to have indicated.

Although the INR 1,194 crore Essel Propack is one of the world’s largest specialty packaging company, it has a relatively smaller presence in the personal care packaging segment. For Ess Dee Aluminum, the deal would boost its market share in the pharma packaging business that currently sees total annual sales of around INR 2,000 crore in India alone.