Danone (BN), the maker of Nutricia and Cow & Gate, rose in Paris trading after a report that the company is considering the sale of its medical nutrition unit in a deal that may fetch more than 3 billion euros ($4 billion).
The shares advanced as much as 1.7 percent and were up 0.8 percent at 50.45 euros as of 9:24 a.m.
Danone asked JPMorgan Chase & Co. to advise it on potential buyers for the medical nutrition unit, Reuters said yesterday, citing people familiar with the matter. Possible bidders include Nestle SA (NESN) and healthcare companies such as Abbott Laboratories (ABT:US) and Baxter International Inc. (BAX:US), according to the report. Danone spokeswoman Charlotte Pasternak declined to comment.
The chances of a deal getting done are high, according to Pierre Tegner, an analyst at Natixis Securities in Paris. Danone may seek to sell only part of the business, Jeff Stent, an analyst at Exane BNP Paribas in London, said by e-mail.
“Although we would be rather surprised if Danone were to exit its medical nutrition business, given the attractive structural growth nature of the industry, it is not something that we would completely rule out, given Danone’s frequent tendency to adjust the portfolio,” Stent said in a note.
Danone acquired Numico in 2007 to become Europe’s biggest maker of foods for young children and gain a foothold in Asia and the Middle East. The purchase added Cow & Gate and other baby-food brands, as well as a division that makes foods for people with diets restricted by illness. Medical nutrition now accounts for about 6 percent of group revenue.
Danone agreed yesterday to pay 486 million euros to more than double its stake in China Mengniu Dairy Co. to 9.9 percent as the nation’s demand for dairy products rises. The investment will help rebuild its presence in China, about four years after the Paris-based company sold its stake in a venture with drinks maker Hangzhou Wahaha Group Co. amid a dispute.
Sales at Danone’s medical nutrition unit, which includes Fortimel to counter malnutrition and Neocate, a hypoallergenic product for children, rose 5.6 percent in the first nine months of 2013 on a like-for-like basis to 994 million euros.
“If the company thinks it’s better to refocus its managerial and operational resources for the development and stabilization of its core business which faces several challenges in the short term, that can justify a divestment,” Tegner said.
Danone is the world’s third-biggest maker of tube feeding products with a 16 percent market share, behind Abbott with 30 percent and Nestle with 25 percent, according to Exane BNP Paribas estimates.
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