Despite global markets turmoil, Australia's Southcorp is on schedule to become a wholly wine producing company by selling its water heating operation, the business daily Financial Review reported.

AO Smith Corp, of the US, one of the main bidders, has dropped out following another purchase leaving the Japanese company Paloma as the front runner.

Paloma, which owns the Rheem brand in the US, is already conducting due diligence and the Financial Review said all bids were expected to be finalised by late October or early Novembe, with the company confident of a successful outcome, despite the chaos on global equity markets.

As earlier tracked by just-drinks, Southcorp is in the midst of massive restructuring and expansion following an acquisition of Rosemount Wines - now generally perceived as a reverse takeover, leaving Rosemount in virtual control at board and management level.

Although it leads the market in Australia and is a major in America, sale of the water heating arm - a legacy of earlier corporate upheavals - is seen as a distraction to Southcorp's aim to be a wine producer of global significance.