Danone is in advanced talks to sell its medical-nutrition business to Nestle SA after Fresenius SE dropped out of the process, according to people familiar with the matter.
While a sale to Nestle is the most likely outcome, the transaction faces antitrust hurdles in some western European markets where the two companies operate, said the people, who asked not to be identified as the deliberations are private.
Talks with Nestle could still fall apart and Paris-based Danone could decide against a sale, the people said. There are still other bidders interested in the medical-nutrition business, one of the people said. Danone, the world’s biggest yogurt maker, could fetch about €3 billion ($4.1 billion) from the sale, the people said.
“For Nestle, acquiring Danone’s medical-nutrition business would tick the right strategic boxes -- whether it would be a good deal or not would come down to price,” said RBC Europe analyst James Edwardes Jones, adding that he doesn’t see a compelling reason for Danone to sell it.
Danone rose as much as 1.4%tin Paris trading and was up 1.1% at €52.85 as of 1:13 p.m. Nestle shares advanced 0.3% to 69.30 Swiss francs in Zurich.
Fresenius, which was considered one of the strongest contenders for the medical-nutrition unit, is no longer interested, the people said. Chief Executive Officer Ulf Mark Schneider last week said the company isn’t working on deals bigger than €1 billion at the moment.
Fortimel, Neocate
Representatives for Danone, Nestle, which is based in Vevey, Switzerland, and Fresenius declined to comment.
Sales at the Danone unit, which includes Fortimel to counter malnutrition and Neocate, a hypoallergenic product for children, rose 5.2% in the first quarter on a like-for-like basis to €328 million. Revenue at the division was about €1.3 billion for all of last year, representing about 6% of the group total.
The unit gets 67% of sales from Europe and counts the U.K. and France as its two biggest markets.
Bloomberg
