San Miguel is in talks to sell up to 49% of Australia's National Foods to Japan's Kirin Holdings, a company source said on Thursday.
A San Miguel source also said the company had been approached by others, including private equity group Carlyle, on its National Foods stake.
Philippines-based San Miguel, Southeast Asia's largest food and drinks group, would use proceeds from any sale to pay down debt and fund acquisitions as it branches into new areas such as mining, power, and infrastructure, the source told Reuters.
Earlier on Thursday the Australian Financial Review newspaper had said Kirin may make a bid of over A$2 billion (US$1.7 billion) for National Foods, whose brands include Pura white milk, Big M flavored milk, King Island cheese and Yoplait yoghurt.
National Foods had confirmed ownership talks but had not given details. Kirin spokeswoman Yuko Kusano declined to comment.
National Foods, one of Australia's largest food companies, reported operating income rose 10% in 2006 to A$170 million, on an 8% increase in revenues to A$1.84 billion.
The company was created in 1991 by combining several dairy and food businesses, some dating back to the 1800s.
San Miguel bought National Foods in 2005 for A$1.9 billion, its largest ever acquisition. It also took over control of fruit juice maker Berri, based in Australia, which was later folded into National Foods.
San Miguel said last month it would spin off its beer and regional packaging divisions and invest in mining, infrastructure and power.
Kirin is the largest shareholder in San Miguel with a stake of around 20%. In Australia it controls Lion Nathan, the owner of beer brands including Tooheys and 'XXXX', through a 46.1% stake valued at A$2.3 billion.