Danone's announcement last week to sell its biscuits division to Kraft Foods for 5.3 billion euros had renewed such talk and led investors to believe that the French company would use the proceeds of the sale to finally buy Numico.

Danone itself was last year seen by some investors as a takeover target, when its shares rose in July following reports that PepsiCo might make a bid.

Numico's shares had risen 11% to 44.50 euros early on Monday in Amsterdam before being suspended by the Dutch financial markets.

Some investors, including Michele Giovannetti, a fund manager at Montpensier Finance in Paris, told Bloomberg that the purchase was a good move for Danone but that the price was "quite high."

Franck Riboud, the Danone chairman and chief executive, said "the price Groupe Danone was offering on Monday is a reflection of the outstanding quality and positioning of Numico as one of the world's leaders in healthy nutrition."

The takeover follows Nestle's agreed purchase of a baby-food business from Novartis for $5.5 billion in April.

Food companies are expanding in the specialty nutrition market, where sales are growing faster than the rest of the food industry. Danone already owns the baby-food brand Bledina, which is part of its dairy unit, and ranks top of the health and wellness market, followed by Nestle and Kraft, according to Euromonitor International.

Danone and Numico said the takeover "is not expected to have significant negative consequences on the employment situation of the combined business."

Numico will continue to be headquartered in Schiphol in the Netherlands, and Danone will run the business as a unit, keeping its current organization intact.

Danone, which also owns the Evian water and the Activia yogurt brands, has been attracting customers by selling products that it markets as healthy. Revenue in the first quarter rose 3.9% to 3.67 billion euros on demand for its products in Europe and the United States.

Under the leadership of Jan Bennink, Numico's chief executive, who joined from Danone in 2002, the Dutch baby-food maker started to focus on its core business in high-growth, high-margin markets, selling operations in Mexico, India and South Africa.

Competing with Danone and Nestle, rivals with larger advertising budgets, Numico expanded in Italy and China, which promised faster growth.

It invested in innovation of new products and sold unprofitable vitamin units. Last year, Numico bought Dumex, which sells baby food in China and Vietnam.

Numico had sales of 2.62 billion euros last year, with about 72% coming from the baby-food business.

Numico's roots go back to 1896 when Martinus van der Hagen secured the exclusive rights to produce a baby milk formula from cow's milk.

The company also focused on developing special diet products like low-sugar milk for people suffering from diabetes. Today, Numico's products include milks, cereals, meals, drinks and desserts under the brands Cow & Gate, Olvarit and Bobovita.

Danone was set up in 1966 as Boussois-Souchon-Neuvesel, a maker of glass bottles for beverages. The company then expanded into foods and drinks and started not only selling the containers but also the contents. In 1973, Boussois merged with Gervais Danone to create the biggest food group in France.

The two companies said they expected the deal to be completed by October. Goldman Sachs and Citigroup advised Numico. Lazard and BNP Paribas worked with Danone.

From the July 16, 2007, Prepared Foods e-Flash