Danone in talks to sell medical nutrition unit to Hospira: FT

PARIS Sun Jul 27, 2014 3:45pm EDT

Fresh dairy products by French Group Danone are seen on display on shelves during the company's 2013 annual results presentation in Paris February 20, 2014.   REUTERS/Benoit Tessier

Fresh dairy products by French Group Danone are seen on display on shelves during the company's 2013 annual results presentation in Paris February 20, 2014.

Credit: Reuters/Benoit Tessier

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PARIS (Reuters) - French dairy group Danone (DANO.PA) is in talks to sell its medical nutrition business to U.S. group Hospira (HSP.N) in a deal valuing the unit at about $5 billion, the Financial Times reported on Sunday, citing people familiar with the situation.

The business paper said on its website that no deal was certain and that the talks were ongoing.

Contacted by Reuters, a spokesman for Danone in Paris declined to comment. No one at Hospira immediately returned a request for comment.

The deal would allow the U.S. buyer to move its tax base to Europe, the FT said, a practice known as "inversion" criticized by President Barack Obama.

Reuters reported in February that Danone, the world's biggest yoghurt maker, was considering selling the business - which makes feeding tubes and foods and beverages for people with special nutritional needs - even though it has a profit margin above the group average.

The company is most likely to use the proceeds from a sale to fund an expansion of its faster-growing baby food and dairy businesses, targeting acquisitions in Asia and Africa, analysts say.

Danone posted a worse-than-expected fall in first-half operating profit last Friday after sluggish sales of baby food in Asia and dairy products in Europe took their toll.

Danone's challenges have refocused analysts' attention on its relatively small size compared to giants such as Swiss rival Nestle. Analysts have cited Nestle (NESN.VX) and Pepsico (PEP.N) as the most likely potential buyers.

(Reporting by Michel Rose, editing by David Evans)

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