Australian packaging group Amcor Ltd is nearing a purchase of some of Rio Tinto Ltd's assets, sources said, in a deal that could be valued at up to $2.4 billion.

The deal, talk of which drove Amcor's shares up more than 8 percent on Wednesday, would follow Rio's move earlier this week to sell its U.S. food packaging unit to Bemis Co for $1.2 billion. Analysts said that sale demonstrated Rio's seriousness in getting rid of its non-core assets.

One source said Amcor was looking to pay between 6-6.5 times core earnings for the non-U.S. packaging assets. Amcor is interested in buying Rio's European food, pharma and tobacco packaging businesses, along with the Asian food business but may leave out the beauty business, analysts have said.

Earnings before interest, tax, depreciation and amortization for those businesses in 2008 stood at $363 million. Applying a 6.5 multiple, the deal value works out to about $2.4 billion.

The timing is unknown...there has been no agreement yet, another source, who had direct knowledge of Amcor's talks with Rio, told Reuters. The sources declined to be identified as the discussions were confidential.

An Amcor spokesman declined to comment. The company first confirmed it was in talks to buy some Rio assets in February. UBS is advising Amcor.

The market is probably warming up to the view that Amcor is likely to buy some of the packaging assets from Rio at an attractive price, said Paul Xiradis, CEO of Ausbil Dexia, which oversees about $9 billion including Amcor shares.

DOMINANT FORCE

Amcor, which has a market value of A$4.3 billion, is widely expected to fund the purchase through a mix of equity and debt. A successful bid would lead to an A$1.5 billion capital raising, analysts estimate.

New shareholders want to buy the stock now to participate in the capital raising. Or it could be that those who are short the stock are covering their positions ahead of the raising, Xiradis said.

The potential purchase would present both opportunities and challenges for Amcor, some analysts said.

A successful deal would make Amcor the dominant packaging group in many European countries but Amcor would face significant competition hurdles, JP Morgan said in a July 7 note.

Credit Suisse estimates the deal will boost Amcor's earnings per share by 12 percent in fiscal 2010 due to synergies derived. It raised Amcor's stock rating on Wednesday to 'neutral' from 'underperform'.

Sean Fenton, a fund manager at Tribeca Investment Partners, which manages about A$500 million including Amcor shares, said investors would readily back any capital raising that would add to earnings.

For Amcor, the attraction is a bit more scale and some synergies, he said.

Amcor shares rose as much as 8.3 percent to A$5.08, its biggest one-day percentage gain in about eight months, bucking a fall in the wider market .AXJO.

($1=A$1.26)

(Editing by Muralikumar Anantharaman)