Kraft Foods CEO Irene B. Rosenfeld with Danone chairman Franck Riboud in Paris on Tuesday. (AFP)

Paris, July 3 (Reuters): Danone is in talks to sell its biscuit and cereal unit to the world’s biggest cookie maker, Kraft Foods, for 5.3 billion euros ($7.20 billion) in cash.

Kraft’s widely rumoured bid for Danone’s cookie unit, which includes the LU, Prince and Tuc brands, will give the US food giant a stronger foothold in Europe and in emerging markets and allow Danone to boost its health products in the fresh dairy and drinks segments.

The offer exceeds the estimate of 3.5 billion to 4 billion euros given in several media reports and is more than double the sales of 2.2-billion euros reported by the unit last year. Danone’s stakes in its Indian and Latin American businesses are not part of the deal.

Danone and Kraft expected that a final agreement could be reached in the last quarter of 2007.

Under the preliminary deal, Kraft does not plan to close any of Danone’s biscuit manufacturing facilities in France for at least three years after the transaction.

Danone shares rose 4.2 per cent. The stock added 2 per cent to 62.15 euros by 1113 GMT, taking the gains to 8.6 per cent this year.

“The multiple at which they sold to Kraft is good and for Danone it’s good to get cash for acquisitions, such as Numico,” a head of research at Cheuvreux said, rating the stock a “buy”.

Some analysts have said the baby food business of Dutch food group Numico could fit with Danone’s dairy business and its Bledina baby food, which sells in France and Belgium.

Takeover targets

Other takeover targets include Russian consumer foods group Wimm-Bill-Dann, in which Danone owns an 18.4 per cent stake as well as the remaining stake in its Chinese Wahaha beverages joint venture.

Danone chairman and chief executive Franck Riboud at a news conference with his Kraft counterpart Irene Rosenfeld left open what Danone intended to do with the cash it fetched, if the deal went ahead.

“I will not comment on what we plan to do,” he said, adding the company could invest in new products or in new countries.

“We are going to speed up all these approaches. We have targets, not the ones you are thinking about, they are mid-sized. I will not give you any information before it's done,” he added.

Kraft’s Rosenfeld expected the takeover to add to the company’s earnings from the first year. She said Kraft could afford Danone biscuits without selling assets.