ROME (AP) _ Italy's state holding company IRI said Thursday it will sell its controlling interest in Italgel SpA, a frozen foods and candy manufacturer, to Nestle SA for 437 billion lire, or about $260 million.

The sale of Italgel represents IRI's first large privatization since the the financially troubled company announced last year it would embark on a major asset sales program.

Under the agreement, Nestle will pay 1,550 lire per share for IRI's 62 percent stake in Italgel. European Community competition authorities must approve the sale.

IRI also announced Thursday that it had rejected all bids for its canned food unit, Cirio-Bertolli-De Rica SpA, and said it would now seek a buyer through private negotiations.