Danone's rumours grow

Related tags Bottled water Groupe danone Danone

There is increasing speculation regarding the future of French
dairy-to-biscuits group Danone, good Q3 results expected next week,
will simply fuel the speculation further.

There is increasing speculation regarding the future of French dairy-to-biscuits group Danone​, with the firm being touted as both a takeover target and a likely bidder in recent days.

Danone is due to report like-for-like growth in the region of 7.4 per cent next week, with the hot summer weather giving a major boost to bottled water sales, but the company's shares are likely to continue to underperform the market as a whole, according to Goldman Sachs, as a result of uncertainty over a possible bid for Russia's Wimm-Bill-Dann.

But the dairy business is the jewel in Danone's crown, according to the analysts, who expect to see double-digit growth from that unit. Organic growth from the biscuit operations is likely to be around -0.5 per cent in Q3 as a result of the hot weather reducing biscuit sales, offsetting in part the better sales in water.

But at the same time as Danone is rumoured to be gearing up to acquire WDB - as early as the end of the month, according to one report this week - the company is also being increasingly viewed as a takeover target.

The French daily newspaper Le Figaro​ speculated this week that Danone could attract bids from companies as diverse as Kraft Foods, PepsiCo or Coca-Cola - a sale which would almost certainly entail the breaking up of the business.

The company itself has made no secret of the fact that it would consider offers which met its value expectations, although it is hard to see any potential buyer wanting to maintain the diversified range of products currently produced by Danone - even if this product mix has been one of the reasons for the company's success.

Certainly there are plenty of potential bidders for the bottled water business, which not only includes Evian and Volvic but also one of the world's biggest water cooler operations after a spate of major acquisitions. The two US cola groups have been moving steadily into bottled water in recent years, but this would be a major step up for them in terms of brand awareness.

The dairy unit is also likely to attract bidders - from the US and from Europe - although the sheer size of it could preclude a number of larger players from bidding.

Related topics Manufacturers Danone

Related news