UPDATE 1-Chiquita to sell German distribution unit for $85 mln

(Recasts; adds details, background, analyst comments)

BANGALORE, May 13 (Reuters) - Banana distributor Chiquita Brands International Inc (CQB.N: Quote, Profile, Research, Stock Buzz) agreed to sell its German distribution unit, Atlanta AG, to privately held UNIVEG Fruit and Vegetables BV for at least $85 million at current exchange rates.

Chiquita, known for its namesake bananas and Fresh Express bagged salads, said it expects Atlanta AG's sale to the Belgian-based supplier of fresh produce to result in a gain and plans to use the net proceeds mainly for debt reduction.

The deal also allows Atlanta AG to continue to serve as Chiquita's preferred supplier of banana ripening and distribution services in Germany and Austria.

The transaction, which is subject to the approval of antitrust authorities in Europe, is expected to be completed by the end of the second quarter.

In October 2007, Chiquita said it was seeking strategic alternatives for Atlanta, which operates 17 distribution centers in Germany and Austria that ripen and distribute bananas and other produce, most of which carry third-party labels.

Cincinnati, Ohio-based Chiquita will begin presenting Atlanta as a discontinued operation in its financial statements beginning in the second quarter of 2008.

In a note dated May 12, BB&T Capital Markets analyst Heather Jones said she viewed the divestiture of loss-making Atlanta business very positively. (Reporting by Dhanya Skariachan in Bangalore; Editing by Jarshad Kakkrakandy)