French food manufacturing colossus Danone has been earmarked as a likely candidate to buy Fonterra subsidiary New Zealand Dairy Foods.

The French group recently bought Frucor Beverages, the NZ soft drinks group, and is estimated to be the prime candidate among the five potential bidders for Dairy Foods. Danone is remaining characteristically tight-lipped on the subject, but is reported by the Australian press as being on the brink of pursuing due diligence on the company. Dutch bank ABN Amro, which is advising on the sale, has also declined to comment.

Fonterra has been forced to sell half its holding in Dairy Foods to satisfy competition authorities. Dairy Foods manufactures Anchor milk and cheese, and Fresh ‘n Fruity yoghurt. The group enjoys a 40% share of New Zealand’s domestic dairy produce sales.

Three of the other companies alleged to be mulling buying into Dairy Foods are National Foods, Great Milk Company and Friesland Coberco Dairy Foods. The identity of the fifth potential bidder remains a secret.

The sale must be signed and sealed by October to satisfy regulators.