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Nestlé, the Swiss food titan behind some of the world’s most iconic consumer brands, has enlisted Rothschild & Co. to guide the sale of its global water division later this year, according to four sources with direct knowledge of the matter. The sale could fetch over €5 billion ($5.6 billion), signaling a seismic shift in the company’s strategy under new CEO Laurent Freixe.

As part of Freixe’s mission to trim Nestlé’s sprawling portfolio of 2,000 products down to a sharpened core of about 30 flagship brands—think Kit-Kat, Nescafé, NAN formula, and Maggi noodles—the water division has been deemed a non-core asset.

Liquid Assets on the Market

The bottled water business, which includes high-profile names like Perrier and S.Pellegrino, has faced an uphill climb in recent years, burdened by global concerns about water scarcity, regulatory scrutiny, and flagging demand post-COVID. Nestlé already offloaded its North American water brands in 2021 for $4.3 billion.

Despite those headwinds, Nestlé’s water business—newly carved out into a standalone unit as of January 1—has been drawing strong early interest from private equity powerhouses. Platinum Equity, Blackstone, and One Rock Capital Partners are among those who’ve held preliminary talks, while PAI Partners and Clayton, Dubilier & Rice (CD&R) have also emerged as potential contenders, sources said.

Strategic Sale, Not a Full Exit

Unlike the 2021 divestiture, this move won’t be a clean break. Nestlé reportedly plans to retain a minority stake in the water unit, hedging its bet on a potentially lucrative but turbulent sector.

“The main struggle is at Perrier,” noted Vontobel analyst Jean-Philippe Bertschy, highlighting operational and compliance challenges. “They’ve had issues at several sources, and there’s an ongoing battle with French authorities.”

Still, most of the water brands remain profitable, with the division posting a 2.9% revenue uptick in Q1, reaching 722 million Swiss francs ($874 million), though that accounts for less than 4% of Nestlé’s total earnings.

Legal Waters and Bottled Pressure

Nestlé’s water operations in France have faced regulatory challenges, prompting reviews of its mineral water sourcing practices. Though the company has asserted that its products are safe and its production currently complies with French law, past lapses in regulatory adherence at certain sites have cast shadows over the division.

Sanjay Bahadur, head of Nestlé’s global strategy, acknowledged last November that private equity and strategic buyers have eyed the water unit for decades. That interest has only intensified as the company formalizes the sale process.