Brazil's Hypermarcas in talks to sell diaper unit to Belgium's Ontex

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[December 22, 2016]  By Guillermo Parra-Bernal

SAO PAULO (Reuters) - Belgium's Ontex Group NV said on Thursday it is in advanced talks to buy the diapers business of Hypermarcas SA, Brazil's most diversified pharmaceutical firm.

Confirming that discussions on a possible acquisition of Hypermarcas' personal hygiene business were at an advanced stage, Ontex cautioned that neither side was legally bound to go ahead with a deal.

"There can be no assurance that a transaction will ultimately materialize. Ontex will provide further updates in due course if necessary," it said.

Earlier a person familiar with the transaction had said a sale was set for about 1 billion reais ($300 million) in cash. A public relations executive for So Paulo-based Hypermarcas had no immediate comment.

Ontex shares were up 5 percent at 0930 GMT after it confirmed the talks.

Last year, Hypermarcas hired advisers to look into a spin-off or an outright sale of the unit, whose performance has suffered from lack of scale and brand recognition, and soaring costs for raw materials amid a sharp drop in the Brazilian currency.

Reuters reported in October last year that Hypermarcas had offered the unit to Kimberly-Clark Corp <KMB.N>, Chile's Empresas CMPC SA <CAR.SN>, Procter & Gamble Co <PG.N> and Svenska Cellulosa SCA AB <SCAb.ST>.

The deal, from which Hypermarcas was seeking 1.5 billion reais, was halted a few months later amid price divergences and tax issues, people familiar with the decision said in recent months.

Apart from consolidating Hypermarcas' exit from disposable goods, the deal also marks Ontex's entry into Latin America's No. 1 economy following the takeover of Mexico's Grupo P.I. Mabe SAB in March. Founded in 1981, Ontex is moving into so-called growth markets to counter feeble activity in Western Europe, the Middle East and Russia.

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Shares of Hypermarcas have risen 15 percent this year, lagging a 33 percent jump in the benchmark Bovespa stock index. Part of that reflects the impact of Brazil's harshest recession since the 1930s and political turmoil on consumer goods and pharmaceutical firms such as Hypermarcas.

Over the past couple of years, Chief Executive Officer Claudio Bergamo has focused Hypermarcas solely on drugs, after the diversified firm was likened to Unilever Plc <ULVR.L> just a few years ago.

Bergamo, with the blessing of controlling shareholder and Chairman Joo Alves de Queiroz Filho, spearheaded a spree of two dozen acquisitions in the drug, home-cleaning, beauty care and processed food industries at the end of last decade.

Currently, Hypermarcas is one of Brazil's leading producers of over-the-counter and generic drugs.

(Reporting by Guillermo Parra-Bernal; additional reporting by Philip Blenkinsop in Brussels; Editing by Lisa Shumaker and Adrian Croft)

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