ZURICH (Reuters) - Nestle (>> Nestle SA) is the frontrunner to buy Merck KGaA's (>> Merck KGaA) consumer health unit that could fetch as much as $5 billion, financial news service Bloomberg said on Wednesday, quoting unidentified sources familiar with the matter.

Bloomberg said Nestle had submitted the highest offer and Merck was likely to select a winner during the first quarter, but might also choose not to sell the assets after all.

It quoted sources saying that generic drugmaker Perrigo (>> Perrigo Company PLC) and the private equity owners of German drug firm Stada (>> STADA Arzneimittel AG) had dropped out of the process, while Reckitt Benckiser Group Plc (>> Reckitt Benckiser Group Plc) and Mylan NV (>> Mylan NV) were still suitors for the business.

A spokeswoman for Nestle said the company was not commenting on rumours.

(Reporting by Silke Koltrowitz; Editing by Mark Potter)