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By Arno Schuetze and Andreas Kröner
FRANKFURT (Reuters) - German healthcare group Fresenius (DE:FREG) as well as buyout groups PAI and Permira are exploring an acquisition of the medical nutrition business of Danone (PA:DANO) after efforts of U.S. drugmaker Hospira (N:HSP) to buy the unit failed, people familiar with the matter said.
The business, which sells products to feed people that are ill, may reap a valuation of 4 to 5 billion euros (3.17 to 3.97 British pounds), money that the French group could use for a potential acquisition of U.S. baby formula maker Mead Johnson Nutrition Group (N:MJN), sources familiar with the matter told Reuters.
Danone, Fresenius, PAI and Permira declined to comment.
Fresenius had been interested in the business earlier this year but pulled out after it deemed the asking price too high, the sources said.
They added that Fresenius has renewed its interest after Danone's talks with Hospira stalled amid rising criticism in the United States about American companies relocating abroad to cut their tax bills.
Given the complexity of the deal any signing is likely still months away, they added.
Fresenius, whose FMC (DE:FMEG) arm is also active in dialysis services (DE:FMEG), has its own medical nutrition unit called Kabi and for antitrust reasons would likely divest some of the acquired assets after a deal, the people said.
PAI, whose chairman Lionel Zinsou-Derlin sits on Danone's board, is one of Europe's largest food investors with a portfolio that includes snack maker United Biscuits and ice cream group R&R.
"PAI would do any deal (to buy Danone Medical Nutrition) together with co-investors," a person familiar with the process said.
Permira, which also has several food and health-related investments, is also interested the business, two people familiar with the transaction said.
Reuters first reported in February that Danone, the world's biggest yogurt maker, was considering selling the business - even though it has a profit margin above the group average.
(1 US dollar = 0.7835 euro)
(Additional reporting by Sophie Sassard in Paris. Editing by Jane Merriman)