BRAZIL (From news reports) -- Belgium's Ontex Group NV is in advanced talks to buy the diapers business of Hypermarcas SA, Brazil's most diversified pharmaceutical firm, the companies said.

Ontex confirmed discussions on a possible acquisition of Hypermarcas' personal hygiene business were at an advanced stage. The company cautioned that neither side was legally bound to go ahead with a deal.

"There can be no assurance that a transaction will ultimately materialize. Ontex will provide further updates in due course if necessary," it said.

Hypermarcas confirmed the negotiations and said the companies have not yet signed any binding agreement.

Earlier a person familiar with the transaction had said a sale was set for about 1 billion reais ($300 million) in cash.

Last year, Hypermarcas hired advisers to look into a spin-off or an outright sale of the unit, whose performance has suffered from lack of scale and brand recognition, and soaring costs for raw materials amid a sharp drop in the Brazilian currency.

It was reported in October last year that Hypermarcas had offered the unit to Kimberly-Clark Corp, Chile's Empresas CMPC SA CAR.SN, Procter & Gamble Co and Svenska Cellulosa SCA AB.

The deal, from which Hypermarcas was seeking 1.5 billion reais, was halted a few months later amid price divergences and tax issues, people familiar with the decision said in recent months.

Apart from consolidating Hypermarcas' exit from disposable goods, the deal also marks Ontex's entry into Latin America's No. 1 economy following the takeover of Mexico's Grupo P.I. Mabe SAB in March. Founded in 1981, Ontex is moving into so-called growth markets to counter feeble activity in Western Europe, the Middle East and Russia.

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