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Is Danone feeling the need for Mead?

By Shane Starling+

28-Jul-2014
Last updated on 30-Jul-2014 at 10:53 GMT2014-07-30T10:53:01Z

Mead Johnson Nutrition: A Danone target?
Mead Johnson Nutrition: A Danone target?

 Danone shares rose today as rumours strengthened the French dairy giant would sell its medical and paediatric nutrition business (Nutricia), but is the firm streamlining its activities around its core foods businesses or just shifting infant-medical gears?

Media outlets including the Wall Street Journal and The Financial Times reported Danone is in advanced discussions over a potential €3+bn deal for Danone-Nutricia with Illinois-based drug firm Hospira, although previous suitors for the division like Nestlé, Fresenius were not being totally ruled out.

Analysts said Danone, which underperformed in the first half this financial period and has been criticised for losing its innovation edge amid rising raw material costs, slow consumer demand and regulatory upheaval, would use any sales funds to target Mead Johnson Nutrition.

Selling to buy?

Mead may appeal as it is more tightly focused on infant nutrition.

“The question is how Danone would invest the proceeds of a sale,” Patrik Lang from Julius Baer Group told Bloomberg.

“It’s possible a bigger acquisition is imminent – Mead Johnson would be a candidate.”

Mead Johnson Nutrition is estimated to be worth in the vicinity of €14bn and owns infant formula brands such as Enfamil.

Nutricia offerings include Souvenaid (for the elderly) and Nutrini (children).

Danone, which is the world’s largest yoghurt enterprise with mega-brands like Activia and Actimel, was unavailable for comment. Hospira has also not commented on the matter.

Danone Group shares were trading at about €56 today on the Paris stock exchange.

One report suggested Hospira was interested in the deal, in part at least, as it would be able to shift its tax base to France.