Danone aims for organic top spot with US takeover

[PARIS] French dairy giant Danone said Thursday it had agreed to buy US organic foods producer WhiteWave Foods with a view to creating a world leader for organic produce.

The all-cash transaction values the US company at US$12.5 billion and will allow Danone to double its business in the US, the French group said in a statement, adding it expected to finalise the deal by the end of the year.

Danone's share price rose by nearly seven per cent in morning Paris trading on news of the deal.

"Our perfect complementarity will allow us to create a uniquely-positioned organic world leader," CEO Emmanuel Faber said in a conference call.

Both companies' board of directors have unanimously approved the deal, Danone said.

WhiteWave produces a range of organic dairy products and plant-based dairy alternatives, achieving sales of US$4 billion in 2015 with such brands as Silk milk and Earthbound Farm organic salad.

Since its stock market flotation in 2012, WhiteWave has generated an annual increase in operating profit of 20 per cent, Danone said.

The French company said the deal would allow it to tap into consumer trends "for healthier and more sustainable eating and drinking options".

"Organic foods and beverages and non-GMO plant-based alternatives to milk and yogurt are among the fastest growing categories in the industry," Danone said.

Dairy products are already a core business for Danone, which employs 100,000 people worldwide and generated US$22.4 billion of sales last year. Its portfolio also includes baby food and water.

"The value-creation profile is strong. We will contribute 100 years of research and development into protein fermentation, which will be combined with WhiteWave's transformation know-how," Mr Faber said.

Danone said it had offered to pay US$56.25 per share "representing a total enterprise value of approximately US$12.5 bn." It said the takeover will be financed entirely by debt.

The deal, which is expected to produce annual synergies of US$300 million by 2020, has yet to be approved by WhiteWave's shareholders and by competition authorities.

Morgan Stanley equity analyst Eileen Khoo said the acquisition reflected a "sound strategic rationale" and was likely to increase Danone's sales by 18 per cent.

"We view this as a very solid deal for Danone," she said.

It was, she noted however, a surprise for analysts who had expected Danone to pursue growth by its own means and cost-cutting, rather than acquisitions.

At around 0830 GMT, Danone shares stood 6.8 per cent higher at 67.61 euros.

AFP