* Apollo to take 51 pct
* French FSI fund to take 10 pct
* Price details not disclosed; deal not leveraged
* AEP sales around $4 bln last year
* IPO possible in 3-5 yrs - FSI exec board member
By Astrid Wendlandt and Julien Ponthus
PARIS, Aug 5 (Reuters) - Rio Tinto (RIO.L)(RIO.AX) plans to sell a controlling stake in its French aluminium unit to U.S. private equity firm Apollo Management [APOLO.UL] and the French state, buoying Paris’ control over the strategically important industry.
The sale of Alcan Engineered Products (AEP) would create a new aluminium champion in France six years after former parent Pechiney was sold to Canada’s Alcan, causing a political outcry.
Under the proposed deal, which included no financial details, Apollo would take 51 percent of AEP while France’s FSI strategic investment fund would take 10 percent, the FSI said on Thursday. Rio would keep the rest and continue to be a partner and supplier.
In a statement, Rio said it would respond to the offer after talking to employee representatives.
“The presence of the FSI means it is anchored in France and will continue to be,” FSI executive board member Bertrand Finet said.
“To be able to list this new group on the stock exchange in a few years would in my view be an interesting step in this new story,” he added.
Most of AEP was once a part of French aluminium giant Pechiney and makes aluminium parts for Airbus EAD.PA planes, TGV trains and Peugeot (PEUP.PA) cars. The FSI also owns stakes in geophysical services provider CGG Veritas (GEPH.PA) and grain producer Limagrain, among others.
AEP, which employs around 10,000 staff, made sales of about $4 billion last year, over half of which came from European clients.
The transaction is meant to infuse new life into a company whose sale to Canada’s Alcan in 2003 sparked calls to protect French industrial flagships from foreign takeovers.
Pechiney afterwards was swallowed up by global mining group Rio Tinto in 2007, when it bought Alcan.
Some of the AEP’s plants are part of the original Pechiney, while others used to belong to Alcan and Alusuisse, with which the Canadian company merged in 2001.
Founded in 1855, Pechiney used to be one of France’s biggest industrial groups, and was nationalised in the 1980s before being privatised again in 1995.
The financing of the deal is not being made through a leveraged buyout, so debt will not be piled on the new company.
“Apollo is acquiring the business at the bottom of the cycle,” a person close to the matter told Reuters. “In my view, the real recovery will not be before 2011.”
The deal will be the first time that Apollo has made a sizeable investment in France. It opened an office in London only four years ago and has $50 billion under management, of which two-thirds are private equity.
The fund has experience managing heavy industries as it still owns stakes in Noranda Aluminium Holding NOR.N, which smelts and refines aluminium, and which floated last month.
The U.S. company still holds investments in Metals USA (MUSA.N), which also obtained a listing last month.