July 7, 2016

Danone is pursuing its largest acquisition in a decade to gain a significant share of the rapidly growing U.S. organic market. The French giant has agreed to acquire U.S. organic foods and dairy producer, WhiteWave, in a deal that would value the company at $10 billion and double Danone’s North American revenues.

Danone, maker of popular dairy brands including Activia, Oikos, and Dannon yogurt, will pay $56.25 per share in cash for WhiteWave, representing an approximate value of $12.5 billion including debt and liabilities, and marking a 24% premium over WhiteWave’s 30-day average closing price.

After facing headwinds in some of the world’s largest markets, including Brazil and Russia, this deal for WhiteWave will increase Danone’s North American market share from 12% to 22% of its total portfolio.

But it is important to note, this additional market share will be focused on organic foods and beverages and non-GMO plant-based dairy alternatives – some of the fastest growing segments in the food industry. In addition, WhiteWave represents the fastest growing food and beverage company in the U.S. and one of the fastest growing in Europe, offering top brands including Silk almond milk, Earthbound Farm Organic salads, Wallaby Organic, International Delight, and Horizon organic milk.

Since going public in 2012, WhiteWave has become one of the best positioned food and beverage companies in the U.S., according to Forbes. It has seen its sales increase at a CAGR of 19% through 2015 and has seen its operating income double over the same time period. Sales for the company grew by 11% so far this year, according to Bloomberg, and have doubled since 2010 as a result of increased consumer demand for healthier food and beverage options. The company’s North American sales accounted for 86% of WhiteWave’s total revenues of $3.9 billion last year, while sales from Europe accounted for 14%.

“This unique combination positions us better to address tomorrow’s consumer trends and represents a great opportunity to step change the ambition of our plan for an Alimentation revolution and to accelerate our path towards strong sustainable and profitable growth by 2020,” said Emmanuel Faber, Chief Executive, Danone. “It will allow us to enhance Danone’s growth profile and reinforce our resilience through a broader platform in North America.”

After years of the largest global food companies looking to emerging markets for growth opportunities, The Wall Street Journal notes that this deal is an indicator of Europe’s largest companies turning away from the volatility, and toward North America for the higher level of stability it offers.

“We believe WhiteWave’s size, positioning and geographical footprint fit perfectly with Danone’s strategy and that it is the right transaction at the right time,” said Franck Riboud, Chairman, Danone in a company statement.

It is also the first deal since Emmanuel Faber assumed the role of chief executive at Danone in 2014, when he undertook a review of the group’s China business, reorganized its dairy division, and pledged to return the company to “strong, profitable and sustainable growth by 2020”.

Danone will finance the transaction that it says will “create a leading U.S. refrigerated dairy player, as well as one of the top 15 largest U.S. Food and Beverage manufacturers” through debt, and states that it expects the deal to result in an increase in operating profits of $300 million by 2020. The transaction is scheduled to close by the end of the year, subject to approval from WhiteWave shareholders and regulatory bodies.

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Lynda Kiernan