The long-anticipated sale of Rio Tinto's (LSE:RIO) aluminum packaging division has run into tight credit markets that could be hampering efforts to sell the business to one buyer, industry analysts said Friday.

"Nobody wants to go in and take a big slug off right now," said packaging analyst Christopher Manuel of KeyBanc Capital Markets.

He said industry sources have indicated Rio Tinto is now willing to sell the division in a few pieces to help facilitate a transaction, which could be worth up to US$5 billion.

Rio Tinto Alcan CEO Dick Evans said a year ago that the company had received high interest from very credible parties and would end up with quite a good value.

The company is rumoured to have lined up strategic buyer Sealedair (NYSE:SEE), but that deal was scuttled when credit markets melted, removing the financial leverage for the private equity partner, Manuel said in an interview from Cleveland.

Rival American aluminum producer Alcoa recently agreed to sell its packaging and consumer businesses to New Zealand's Rank Group Limited for US$2.7 billion.

Alcan had said the division would be sold even before it accepted a friendly US$38.1 billion takeover offer from Rio Tinto more than a year ago. It uses plastics, engineered film, aluminum, paper, paper board and glass to produce food, pharmaceutical, beauty and tobacco packaging.

The operations, which employ some 31,000 people, were enhanced with Alcan's 2003 acquisition of French aluminum producer Pechiney.

"It's a good franchise," Manuel said. "It's more an issue of finding somebody that can digest all of parts or pieces and has the balance sheet and is willing to go out and make a purchase today in what are obviously very, very choppy markets."

The division is now one of about US$15 billion worth of assets the London-based parent company plans to sell as it focuses on upstream metal production.

Rio Tinto Alcan spokesman Stefano Bertolli wouldn't say if the packing assets were part of the US$10 billion earmarked to be sold.

"Our preference is to sell it whole but at this point the process is ongoing and I can't really say what we are looking at in terms of different options," he said.

Among the potential suitors named is Bemis, a Wisconsin-based packaging company with US$3.6 billion in annual sales.

Spokeswoman Melanie Miller wouldn't confirm if that company is interested in Alcan's packaging business, but said acquisitions have been part of its growth strategy.

"There are a number of packaging companies in the world, both private and public, that we would continue to look at as the industry changes and continues to consolidate."

BMO Capital Markets analyst Tony Robson said he's surprised the sale is taking longer than expected, because the division has been touted as one of the world's best packaging companies.

"I don't know if they couldn't find a buyer for all of it or nobody could raise the $4 billion to $5 billion you would expecting it to be sold for," he said.

Rio Tinto Alcan continues to expand its packaging business even as it awaits its ultimate sale. It recently opened a US$10 million flexible packaging plant in India that will expand its presence in Asia.

Emerging markets represent about 20 per cent of its US$6.2 billion of annual sales. The company has been slimming down operations in developed countries by closing facilities in the U.S. and Europe.

Tightening credit markets have generally blunted - but not eliminated - all merger and acquisition activity, observed mining analyst Charles Bradford of Soleil Securities in New York.

"There are big deals getting done; I think it's just more difficult," he said.

"You probably have to use more cash, less leverage."