May 17-Private equity firm Apollo Management APOLO.UL is in discussions to buy Pactiv Corp (PTV.N), the maker of Hefty food storage and garbage bags, a source familiar with the situation said on Monday.

Pactiv shares jumped 20.2 percent to $28.82, valuing the company at about $3.8 billion.

Shares of rivals also rose, with packaging company Bemis Co (BMS.N) up 3.6 percent and Glad rubbish bag maker Clorox Co (CLX.N) up 1.1 percent.

The talks between Pactiv and Apollo are further evidence of a resurgence in leveraged buyouts as the economy improves and the availability of financing increases.

News of Apollo's talks was earlier reported by the Wall Street Journal which said any deal was a few weeks away and faced several hurdles.

Apollo and Pactiv declined to comment.

HEFTY POWER

A deal would make sense for Apollo, which has a similar investment in plastics firm Berry Plastics, Robert Baird analyst Ghansham Panjabi said.

He said Apollo could integrate the two companies and eventually take the combined entity public.

"The Hefty brand is pretty powerful," said Panjabi. He thinks a deal could value Pactiv about $34 a share.

The combination of Berry and Pactiv would create the biggest U.S. plastic packager, which would be set up for a push into overseas markets, he said.

Berry has annual sales of about $4 billion, while Pactiv generates about $3.5 billion.

Pactiv, which competes with Clorox's Glad and generic packaging brands, reported long-term debt of $1.43 billion as of March 31, a 12.6 percent increase from a year earlier.

In April, Pactiv said its first-quarter profit fell 38 percent due to sluggish demand and high raw material costs, and the company also trimmed its full-year forecast.

Demand for Pactiv's products waned during the recession as consumers ate out less often, but there has been some improvement in recent months.

"One thing that has surprised us is how slow consolidation has been in plastic packaging," said Panjabi. "We've seen it on the metal side, we've seen it in glass. We've not seen it until now in plastics."