* Kraft has spun off snacking business from grocery
* Danone keeps Vitasnella milk derivatives
* Mondelez makes over a third of sales in Europe
By Antonella Ciancio and Dominique Vidalon
MILAN/PARIS, Oct 5 (Reuters) - Kraft Foods Europe, which is being integrated in spun-off snack giant Mondelez International , is buying Italy's Vitasnella snack business from French foods maker Danone for an undisclosed sum as part of its consolidation plans in Europe.
The maker of Oreo cookies and Cadbury chocolates, which still operates under Zurich-based Kraft Foods Europe Gmbh in Europe, said on Friday it would retain Italian production of low-fat Vitasnella biscuits, snacks and bread derivatives.
Danone, which sold its global biscuit business to Kraft in 2007 but kept hold of Vitasnella, was making the snacks under licence with Kraft before deciding to sell the business.
Danone will keep the Vitasnella brand for yogurt and cheese.
Neither Danone or Kraft disclosed financial details. Mondelez could not be reached for comment.
"The deal fits well into the spin-off of Kraft Foods Group in North America announced recently and the arrival of a new international company Mondelez International, listed on Nasdaq and world leader in snacks, but it is also a confirmation of the interest of the group in investing in our country for future growth," Valerio Di Natale, head of Kraft Foods in Italy and southern Europe said in a statement.
The decision by the food giant to keep production in Italy comes as the country grapples with a deep recession that is forcing industrial groups such as Fiat and Alcoa to lay off workers temporarily or close plants.
The snacking sector is growing faster than other consumer segments as people with a busy lifestyle snap up low-value food to eat on the go.
The Vitasnella brand is known in fashion-hungry Italy for its low-fat products which help keep weight under control.
Mondelez, which also owns Jacobs coffee, Trident gum and LU biscuits, derives over a third of its annual $36 billion revenues from Europe, one of the largest snack markets along with North America.
The group employs about 100,000 people in more than 80 countries, of which 1,500 are in Italy.
Mondelez, a moniker meant to suggest "delicious world," was launched on Tuesday after the demerger from Kraft's North American grocery business, which is still called Kraft.
Its most-sold products in Italy include Milka chocolate, Saiwa biscuits, Philadelphia cheese and Hag coffee.
Mondelez inherited four Kraft plants in Italy, including one in Capriata d'Orba where the Vitasnella products are made.
Danone is expecting business to remain tough in southern Europe in the second half of the year, but is betting on emerging markets to support growth.
Mondelez Chief Executive Irene Rosenfeld said on Wednesday it was happy with the brand portfolio but there may be chances to supplement organic growth with acquisitions in fast-growing markets.
Kraft is among several consumer groups such as Ralcorp Holdings Inc and Fortune Brands to have spun off their business over the last year to focus on core segments.
Mondelez shares were up 0.7 percent at $28.24 on Friday afternoon on the Nasdaq. Danone shares were up 0.6 percent, in line with their European sector .
(Additional reporting by Andrew Thompson in Zurich; Bradley Dorfman in New York; Editing by David Cowell)
Keywords: MONDELEZ DANONE/VITASNELLA