Updated with stock information.

Bemis ( BMS), a food and beverage packager, plans to acquire the Food Americas operations of Alcan Packaging, a unit of Rio Tinto ( RTP), for $1.2 billion.

Following the announcement, Bemis shares were up 4.8% this morning. Rio Tinto ADSs were down 7.5% after the open.

Bemis will buy 23 flexible packaging plants in the U.S., Canada, Mexico, Brazil, Argentina and New Zealand. Alcan Packing Food Americas had $1.5 billion sales in 2008.

The acquisition will increase Bemis's annual sales to $5.3 billion from $3.8 billion. It's expected to be accretive to diluted earnings beginning next year, the company said in a statement late Sunday.

Bemis said it plans to buy the operations for $1 billion in debt and $200 million in equity. The deal is expected to close by the end of 2009.

"Management is confident that the combined companies will generate strong free cash flow to support diligent debt repayment and an investment grade credit rating," Bemis said.

For Rio Tinto, the deal is its latest to reduce its debt, which is about $23.9 billion after raising fresh capital last week through a share issue. Rio incurred significant debt in its 2007 purchase of Canadian aluminum giant Alcan for $38 billion.

"The sale of the Food Americas division is the first significant step in reducing the asset portfolio acquired with Alcan," said Guy Elliott, Rio Tinto's chief financial officer. "The transaction represents solid value given the challenging financial environment."

So far in 2009, Rio Tinto has announced a total of $3.7 billion of asset sales, including its interest in an aluminum smelter in China, Brazilian iron ore operations and a coal mine in the United States.

The statement Monday from Rio Tinto said the company has identified Alcan's packaging and engineered products divisions as candidates for sale.
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