Danone North America PBC is suing kefir manufacturer Lifeway Foods Inc. for allegedly breaching the shareholder agreement signed by the two companies back in 1999.
The reason for the lawsuit is the issuance of around 300,000 shares to Lifeway CEO Julie Smolyansky without seeking permission from Danone.
The lawsuit has been filed in the Circuit Court of Cook County, Illinois, Law Division. The details were revealed in an amended Schedule 13D filing with the US Securities and Exchange Commission (SEC) from March 3, 2025.
Danone’s lawsuit follows a letter addressed to Lifeway’s board of directors on December 30, 2024, in which Danone reports the alleged breaches.
“On December 23, 2024, Ms. Smolyansky disclosed that the Lifeway board (which she chairs) granted her nearly 300,000 new shares of Lifeway stock,” reads the letter signed by Danone deputy CEO, Shane Grant and filed with the SEC.
“In her securities law filing, Ms. Smolyansky acknowledged that this issuance required Danone’s consent under the Shareholder Agreement, and she further admitted that such consent was not granted. Under Section 4.05 of the Shareholder Agreement, this issuance is therefore ‘null, void and of no force and effect,’ and Danone will take all necessary steps to enforce its rights under the Shareholder Agreement and Illinois fiduciary law.”
Danone's attempts to acquire Lifeway have failed - so far
In September 2024, Danone made a proposal to acquire the remainder of Lifeway shares it does not own for $25 per share in cash ($283m in total), but the offer was rejected by the kefir company as ‘opportunistic’.
In November 2024, Danone launched an improved offer, for $27 per share in cash or $307m in total. The revised bid was also turne d down by Lifeway over ‘substantially’ undervaluing the company; but the board of directors said it was ‘not opposed to the sale of the company at any price’.
Danone is a minority shareholder in Lifeway Foods Inc. since 1999, but the two companies’ business relationship has been under increased strain.
In recent months, Lifeway has suggested that Danone is using its shareholder powers – which include right of first refusal (ROFR) and provisions relating to share issuances – to pressure the kefir manufacturer’s board into accepting Danone’s acquisition proposals.
Notably, Lifeway has contended that the shareholder agreement it signed in 1999 is void due to being anti-competitive, a stance that Danone has disputed. SEC-filed correspondence between the two companies’ counsel shows that Danone is concerned about the potential dilution of its equity stake and the possibility of Lifeway to pass along sensitive business information to a competitor.
The Shane Grant-signed letter further alleges that the board’s decision to issue the shares to Smolyansky ‘destroy[s] shareholder value and ignore[s] Danone’s long-established contractual rights’.
The dairy major goes on to allege that the board had “seemingly greenlit a value-destroying gifting program for the CEO in blatant violation of the [s]hareholder [a]greement” over the possibility of a potential sale of the company and demands that Lifeway ‘immediately rescind the improper issuance of stock and commit to abide by the shareholder agreement’.
Lifeway has hit back at the lawsuit, calling Danone’s actions ‘predatory’ and accusing the multi-national of ‘choosing to exploit its vast corporate power to bully Lifeway’s board and its shareholders into accepting an undervalued transaction’.
Lifeway intends to file a counterclaim against Danone and will ‘aggressively contest Danone’s claims’, the kefir manufacturer said in a statement.
The global kefir market is growing at a CAGR of 6.8% and is expected to reach a valuation of $2.44bn by 2027. Danone launched an Activia kefir range under in some European markets in 2024 but has not introduced the line in North America at the time of writing.
