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Danone SA, owner of the Evian and Volvic bottled-water brands, is talking with Japanese beverage makers about the sale of part or all of its water business, three people with knowledge of the matter said.
Danone officials met with Kirin Holdings Co., Asahi Breweries Ltd. and Suntory Holdings Ltd. in Asia this week to gauge their interest in the unit, which may fetch $5 billion to $7 billion, said two of the people, who declined to be identified because the matter is private. The talks are at an early stage and a deal may not be reached, they said.

Kirin, Asahi and closely held Suntory are expanding abroad as Japan’s population shrinks. Kirin, which sells Volvic in its home market, has spent more than $8 billion on acquisitions in the past three years, and Asahi has said it can spend as much as 400 billion yen ($4.9 billion) on takeovers.

“It might work out long term” for the buyer even as the price may be expensive, said Edwin Merner, president of Tokyo- based Atlantis Investment Research Corp., which manages $3 billion. “The water business worldwide should continue to grow, and the good brands should continue to do well, as people are willing to pay up for safe water.”

Kirin rose 5.7 percent, the biggest gain in almost 16 months, to close at 1,145 yen on the Tokyo Stock Exchange. Asahi climbed 0.6 percent to 1,618 yen.

Danone Rises

Danone, the world’s biggest yogurt maker, rose to the highest in more than two years in Paris trading yesterday. The stock advanced 1.5 percent to 47.16 euros, giving the company a market value of 30.6 billion euros ($42 billion).

Sabrina Schneider, a spokeswoman for Danone, and Cecilia de Pierrebourg, a spokeswoman for Tokyo-based Danone Asia Pacific, declined to comment. Jun Sato, a spokesman for Kirin; Takayuki Tanaka, a spokesman for Asahi; and Midori Takahashi, a spokeswoman for Suntory, also declined to comment.

Kirin is the most interested of the potential Japanese bidders, one of the people familiar with the matter said. Suntory told banks this week it was seeking a financial adviser and funding for a deal with Danone, another person said. Danone plans to limit how many buyers it approaches in a sale process, the people said.

“It may be good for Japanese companies to buy Danone’s water business just in Asia, instead of the whole thing,” said Hiroshi Saji, an analyst at Mizuho Securities Co. in Tokyo. He has an “outperform” rating on Kirin and Asahi shares.

Water Sales

Sales at Danone’s water division totaled 2.6 billion euros last year. A deal involving the assets may increase speculation about acquisitions by the Paris-based company, according to Carl Short, an equity analyst at Standard & Poor’s in [bn:WBTKR=MJN:US] London.

Mead Johnson Nutrition Co. [], the Glenview, Illinois-based maker of Enfamil baby formula, would draw interest from Danone and Nestle SA, the world’s largest food company, the people said.

Kathryn Chieger, a spokeswoman at Mead Johnson, declined to comment.

The Wall Street Journal reported earlier that Kirin and Asahi are interested in the water unit. Suntory may also be a suitor for some of the business, the newspaper said.

“These Japanese companies are desperately looking to acquire something to diversify from their home market,” said Short at Standard & Poor’s, who has a “hold” rating on Danone.

Ito En Ltd., a Tokyo-based beverage maker, currently sells Evian bottled water in Japan.


Source: http://www.bloomberg.com/news/2010-11-09/danone-is-said-to-talk-with-kirin-asahi-on-sale-of-bottled-water-business.html