Danone Faces Hostile Response to Potential PepsiCo Bid

Strategic Insights -

French Prime Minister Dominique de Villepin issued a warning to potential foreign bidders for Groupe Danone, describing the food multinational as one of France's "industrial jewels". The statement comes as PepsiCo, with the guidance of investment banks Morgan Stanley and UBS, is reportedly considering a takeover of Danone. Danone's shares have surged 10.2% in the past two days, with some speculating that the company's products, including yoghurt and Evian bottled water, could be a target for PepsiCo. However, a hostile response from politicians and industry experts has emerged, with Laurent Fabius and Dominique Strauss-Kahn questioning the potential bid.

Key Takeaways:

  • Danone's shareholders could face limited voting rights if a bidder does not own at least two-thirds of the company's shares, limiting their voting rights to 12% below this threshold.
  • A poison pill provision in Danone's statutes makes it difficult for a bidder to achieve voting control over the business.
  • PepsiCo is estimated to be able to afford a bid up to Euros 96 per share, according to Sanford C Bernstein analysts.
  • Jean-Louis Borloo, the employment minister, stated that the government will do all it can to oppose a hostile bid, while a person close to Danone denied that CEO Franck Riboud had lobbied the government to scare off PepsiCo.
  • Nestle's possible interest in Danone has been dismissed, with a person close to the company stating that European competition regulators would block such a move.
  • Danone held a board meeting in advance of reporting half-year results today, which could feature an update on the future of DS Waters, its US water cooler joint venture.

Statistics:

  • Danone's shares surged 10.2% in the past two days, and added a further 5.8% to close at Euros 92.65.
  • The average bid price estimated by Sanford C Bernstein analysts is Euros 96 per share.
  • Danone's US water cooler joint venture, DS Waters, has already seen a Euros 450m (Dollars 542m) charge announced in January.

Sources:

  • The Financial Times, "PepsiCo hires Morgan Stanley and UBS to advise on Danone bid"
  • Lex, The Financial Times