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 Talks over the business, which has been valued at 4
billion euros ($5.5 billion), would soon enter a decisive phase,
they said.
Four groups including Nestle and Fresenius had previously shown
interest in buying the business, French daily Les Echos said last
month.
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, Nestle and Fresenius all declined to comment.
Nestle, owner of the Nespresso, KitKat, Perrier and Maggi brands,
has bought outright the dermatology joint venture it had with
L'Oreal and is already a big player in the medical nutrition market.
It has signaled it might move further into healthcare, where growth
prospects and profit margins are more enticing than in its
traditional food markets.
Fresenius, for its part, has said it is ready for bigger deals after
buying hospitals worth 3 billion euros from Rhoen-Klinikum. The
Danone business would complement its Kabi business, which makes tube
feeding and intravenous feeding equipment as well as generic
infusion drugs. ANTITRUST ISSUES
Warburg Research analyst Ulrich Huwald said Fresenius generated
enough cash flows to fund a deal without raising its equity capital
and that a transaction would help diversify both Fresenius and its
Kabi unit.
"So far the division has been reliant to a large extent on
intravenous generic drugs in the United States," he said.
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But industry experts have said that either suitor would have
considerable antitrust issues to address, making it likely that
knock-on deals would follow in markets where the buyer would become
too dominant.
Danone's medical nutrition brands include Neocate, a range of
replacement formulas for infants allergic to cow's milk, and Nutrini
energy drinks for children with faltering growth.
For the $30 billion medical nutrition market as a whole, about
three-quarters consists of products delivered orally or through a
feeding tube, according to analysts from Exane BNP Paribas.
That portion of the market is led by Abbott Laboratories, with a 30
percent share, followed by Nestle with 25 percent and Danone with 16
percent.
Smaller players include Fresenius and Mead Johnson Nutrition.
The remainder of the market is in nutrition delivered intravenously,
and is dominated by Baxter International, Fresenius, B Braun
Melsungen and Hospira.
($1 = 0.7291 euros)
(Additional reporting by Dominique Vidalon and Martinne Geller;
writing by Ludwig Burger; editing by Arno Schuetze and Pravin Char)
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