Danone (BN) rose as much as 2.6 percent after reports that the French yogurt maker is in talks to sell its medical-nutrition unit to Hospira (HSP:US) Inc., a transaction that could raise funds for acquisitions to bolster growth.
Danone and Hospira, a maker of injectable drugs, continue to negotiate a deal for the unit, according to a person familiar with the matter. Lake Forest, Illinois-based Hospira appears to be the most likely buyer for the Danone business, which makes products including the Nutrison tube-feeding system for people whose diets are restricted by illness, the person said. Hospira shares rose as much as 4.7 percent.
The world’s largest yogurt maker has been trying to sell the unit for months. Danone earlier held talks with potential buyers including Nestle SA (NESN) and Fresenius SE about the business, which could be valued at more than 3 billion euros ($4 billion), Bloomberg News reported in May. A sale may give Danone funds for acquisitions to bolster its growth prospects, said Patrik Lang, an analyst at Julius Baer Group Ltd., citing Mead Johnson Nutrition Co. (MJN:US) as a possible purchase.
“The question is how Danone would invest the proceeds of a sale,” Lang said. “It’s possible a bigger acquisition is imminent -- Mead Johnson would be a candidate.”
Adelaide Gremont, a spokeswoman for Danone, declined to comment, while Hospira didn’t respond to calls and e-mailed requests for comment.
Danone traded 0.3 percent higher at 55.20 euros as of 3:51 p.m. in Paris, where Danone is based. That gives the owner of the Evian bottled water and Activia yogurt a market value of about 36 billion euros. Hospira traded 4.7 percent higher at $54.13 at 9:55 a.m. in New York.
Danone’s first-half adjusted operating profit dropped 20 percent as milk prices rose 18 percent, the company said last week. An acquisition of Mead Johnson would bolster the baby-food business of Danone, which competes with Nestle SA in that segment. Glenview, Illinois-based Mead Johnson has a market value of $19 billion.
Bloomberg News reported Danone’s medical-nutrition unit was for sale in May and valued at more than 3 billion euros, citing people familiar with the situation. Bloomberg also previously reported that Danone had been in talks with Nestle and Fresenius SE regarding a sale of the unit.
The Financial Times reported the Hospira talks on its website yesterday, saying the potential $5 billion stock-and-cash deal would allow the U.S. company to move its tax base to France in a deal known as a tax inversion. The newspaper also said it’s unclear if Nestle and Fresenius are still interested in the business.
The medical-nutrition business is Danone’s smallest, with first-half revenue rising 5.3 percent on a like-for-like basis to 682 million euros, about 6.5 percent of total sales. The company gets about half its revenue from fresh dairy products. Its other units are bottled water and infant nutrition.
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