19 July 2007 - The rumoured 2007 spring time merger talks between Nestle and PepsiCo has renewed speculation concerning Danone.
This morning, shares in Danone at the CAC-40 rose 2.19% to 57.
According to a report in ‘La Tribune’, traders have interpreted the Nestle-PepsiCo speculation as a sign that PepsiCo is seeking to enter the European market, and therefore has renewed the Danone-PepsiCo option.
Traders believe that PepsiCo might opt for Danone as the rumoured spring time merger talks with Nestle had collapsed as a number of complications arose, adds ‘La Tribune’.
Traders also said that PepsiCo would have a lot of convincing to do with Danone as the French company’s strategy is more focussed on health products. This issue was reportedly one of the reasons why the talks ran aground with Nestlé.
"Anybody who has followed this company in the past 30 years would have noticed that this company has a very focused and rational acquisitions policy. Over the past few years, the policy has been even more tightly focused on the nutrition sector," Nestle spokesman Francois Perroud said this morning.
Indeed, one recent example would be the sale of LU biscuits to Kraft Foods followed by the acquisition of Royal Numico, a leading European specialist baby food and clinical nutrition company – more in Danone’s health business targets.
Rumour Always in Circulation
The rumours of a PepsiCo takeover of Danone had already resurfaced a few weeks ago.
FLEXNEWS reported that an unnamed source close to the US firm had informed French BFM radio that PepsiCo’s appetite for Danone had never been so strong. The speculation did not have an impact on the Paris bourse as Danone ended that day hardly unchanged.
The BFM radio report broadcasted a few weeks ago also said that Pepsi is considering acquiring Danone as it wants to 'overtake' rival Coca-Cola at all costs.
A press report at the time said that Coca-Cola has a market capitalisation of around USD 124 billion, whereas Pepsi’s is USD 107 billion. Danone has a market cap of around USD 44 billion.
The 2005 rumours of a Pepsi takeover of Danone led to mass media speculation.
The fear of a possible US multinational, aka “American Ogre”, takeover sparked a lot of concern. Former French Prime Minister Dominique de Villepin intervened by saying that a group like Danone was an industrial treasure and told the company that it would be protected by the government from unwanted suitors.