LONDON/FRANKFURT (Reuters) - France's Danone (>> DANONE) is weighing a sale of its tube feeding products business which could fetch over 3 billion euros ($4.10 billion) as it expands its dairy business in higher-growth emerging markets, three people familiar with the deal said.

The Medical Nutrition business, which also makes products like hypo allergenic baby food, could attract interest from peers such as Abbott (>> Abbott Laboratories), Nestle (>> Nestle SA), Baxter (>> Baxter International Inc.) or Fresenius (>> Fresenius SE & Co KGaA), the people added.

JPMorgan (>> JPMorgan Chase & Co.) has been asked to find a buyer for the European market leader, which in 2012 posted sales of 1.3 billion euros and earnings before interest and taxes of 231 million euros.

A sale could enable Danone to focus on its main businesses Baby Food, Dairy and Waters, all in need of investment due to slowing growth in Europe and troubles in Asia.

On Wednesday, Danone boosted its stake in China's top dairy firm, aiming to tap into booming local demand and secure greater control over supply quality in a region which has been hit by food safety scares.

Danone was also reported to be looking at a stake in East Africa's top dairy producer, Brookside Dairy, according to a recent press report that came a few months after it bought 49 percent of West Africa's Fan Milk Group.

Danone declined to comment on the potential acquisition and the potential divestiture. JPMorgan also declined to comment.

The world's leading yoghurt maker suffered a series of setbacks in China last year, including being fined for anti-competitive practices after a probe into price-fixing. It also recalled infant formula products in Asia due to an unfounded health scare stemming from New Zealand-based supplier Fonterra Co-operative Group .

Sector bankers said they expect the tube feeding business could be valued at more than 10 times its expected earnings before interest, taxes, depreciation and amortization.

"This could go for well above 10 times, low to high double digit figures," one banker said.

Based on that expectation the business could be worth roughly 3 billion euros, the sources said.

By comparison, Nestle agreed to buy the medical nutrition business of Swiss group Novartis (>> Novartis AG) for $2.5 billion or 28 times the unit's operating earnings in late 2006.

Earlier this week, Nestle agreed to sell 8 percent of its stake in L'Oreal (>> L'OREAL) and took over control of their Galderma dermatology joint venture. This fuelled speculation that Nestle could be interested in buying more medical assets. But it already has a large stake in the medical nutrition business, which combines elements of food and pharmaceuticals.

"I'm not sure about demand for the asset because of potential anti-trust issues. Nestle was already in the space so they paid up because it was strategic for them," said one of the sources who spoke on condition of anonymity. "All of the major players will have a certain degree of anti-trust issues, they might not be able to buy the whole thing."

Danone's medical nutrition business provides liquid food for hospital patients unable to eat solids, food supplements for elderly people with failing appetites and tailor-made products for allergy sufferers or those with conditions such as epilepsy.

Brands include Neocate, a range of replacement formulas for infants allergic to cow's milk, and Nutrini drink, a line of energy drinks for children with faltering growth.

For the $30 billion medical nutrition market as a whole, about three-quarters consists of nutrition products delivered orally or through a feeding tube, according to analysts from Exane BNP Paribas.

That portion of the market is led by Abbott Laboratories (>> Abbott Laboratories), with a 30 percent share, followed by Nestle (>> Nestle SA) with 25 percent and Danone with 16 percent. Smaller players include Fresenius (>> Fresenius SE & Co KGaA) and Mead Johnson Nutrition (>> Mead Johnson Nutrition CO).

The remainder is in nutrition delivered intravenously, and is dominated by Baxter International (>> Baxter International Inc.), Fresenius, B Braun Melsungen and Hospira (>> Hospira, Inc.).

Growth at Danone's Medical Nutrition arm has been slowing from an annual average of 10 percent, reflecting tough conditions in Western Europe where health budgets are tight.

In the first six months of 2013, the business increased sales by 5.5 percent, while its operating margin added 65 basis points to 19.3 percent.

Overall, Danone expects to post an 2014 EBITDA of 3.7 billion euros, about the same level it reached in 2012, according to estimates from Thomson Reuters I/B/E/S.

($1 = 0.7312 euros)

(Additional reporting by Martinne Geller, Frank Siebelt, Ludwig Burger and Dominique Vidalon. Editing by Jane Merriman)

By Sophie Sassard, Arno Schuetze and Anjuli Davies