Danone to buy U.S. organic foods group WhiteWave


Paris | Reuters — France’s Danone said on Thursday it would double the size of its U.S. business by buying organic foods producer WhiteWave Foods in a deal worth US$12.5 billion, including some $2.1 billion of debt and “other” liabilities.

The purchase will help the French company to pursue affluent consumers by adding WhiteWave’s popular health food offerings such as Silk almond milk, Earthbound Farm Organic salad and Horizon organic milk to its product range as it struggles with setbacks in more challenging markets such as Brazil and Russia.

It is the first major transaction by Emmanuel Faber, who took over as Danone’s chief executive in 2014 and has vowed to return the group to “strong profitable and sustainable growth” by 2020.

Danone, best known for its yogurts Activia and Actimel, said it was offering $56.25 per share in cash to value WhiteWave’s equity at $10.4 billion, making it Danone’s largest acquisition since the purchase of Dutch baby foods group Numico in 2007 (all figures US$).

“We are creating a truly global leader in line with lasting consumer trends for more healthier options,” Faber told a call with analysts.

Shares in WhiteWave closed trading on Wednesday at $47.43, while Danone said its offer represented a 24 percent premium to WhiteWave’s 30-day average closing price.

Healthy option

Denver-based WhiteWave’s products have outperformed mainstream packaged food businesses in recent years as they are in line with a consumer shift toward natural foods and healthier eating.

WhiteWave’s own acquisitions in recent years have included Vancouver-based protein shake, snack bar and supplement maker Vega, for which it paid $550 million last year, and Oregon-based dairy-free food firm So Delicious, bought for $195 million in 2014.

The U.S. company has been seen as an attractive takeover target since its spinoff from Dean Foods, especially for companies like General Mills and Campbell Soup that have been buying healthier brands or reformulating their existing products.

“WhiteWave is the fastest growing U.S food company (10 per cent compounded annual growth rate like-for-like sales over the last three years, 20 per cent including acquisitions) and an excellent fit with Danone, focusing on organic, dairy foods,” said Canaccord Genuity Limited analysts.

WhiteWave generates $4 billion of sales and Danone said it will be able to achieve synergies of $300 million by 2020, representing eight per cent of WhiteWave’s 2015 sales and 80 per cent of its 2015 earnings before interest and taxes (EBIT).

However, Danone is paying about 21.2 times 2016 estimated EBITDA for WhiteWave. That is above an average multiple of around 15 times in recent dairy deals.

RBC Capital markets analysts said the deal was “a big stretch financially notwithstanding its obvious strategic attractions.”

“It seems to bear many of the hallmark’s of 2007’s Numico acquisition when Danone paid 21.7 times forecast EBITDA.”

The deal, which will be 100 per cent debt-financed and will boost earnings per share from the first year after closing, was approved by the boards of both companies.

“This transaction will create a leading U.S. refrigerated dairy player, as well as one of the top 15 largest U.S. food and beverage manufacturers,” Danone said.

After the deal, which is expected to close by year-end, Danone’s North America business will increase to 22 per cent of Danone’s total portfolio, from 12 per cent.

Reporting for Reuters by Dominique Vidalon and Michel Rose.

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