Exclusive: Nestle, Fresenius home in on Danone Medical - sources

LONDON/FRANKFURT (Reuters) - The field of bidders for DANONE (BN.PA)s Medical Nutrition business has narrowed to German diversified healthcare group Fresenius and Swiss food company NESTLE (NESN.CH), two people familiar with the process told Reuters on Friday.

Talks over the business, which had previously been valued at 4 billion euros ($5.5 billion), would soon enter a decisive phase, they added.

French daily Les Echos said last month that four groups had shown interest in buying the business.

Danone put the division on the block - even though it carries a profit margin above the group average - most likely to fund an expansion in fast-growing baby food and dairy businesses, targeting acquisitions in Asia and Africa.

Nestle, owner of the Nespresso, KitKat, Perrier and Maggi brands, has bought outright the dermatology joint venture it had with L'Oreal and has signaled it might move further beyond 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.

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.

All three companies declined to comment.

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. [ID:nL5N0LH4OL] ($1 = 0.7291 Euros)

(Additional reporting by Dominique Vidalon and Martinne Geller; Writing by Ludwig Burger; Editing by Arno Schuetze and Jane Merriman)

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