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‘Activist’ investor stakes £242M to shake-up Danone

By Gary Scattergood , 13-Dec-2012

A US ‘activist’ investor who has stamped his authority on Heinz, Cadbury and Kraft has taken a £242M (€300M) stake in Danone, vowing to improve its profitability.

A US investor has staked a £242M claim in Danone

A US investor has staked a £242M claim in Danone

Nelson Peltz, the head of Trian Partners, said the maker of Activia and Shape yogurts, Evian and Volvic water, and Cow&Gate baby foods needed to slash costs and return funds to shareholders.

Peltz who now has a 1% stake in Danone has previously forced himself and his associates on to the board at Heinz pushing the firm to increase advertising and introduce healthier products.

He has also sought to profit from splits and sell-offs, often wielding significant influence with relatively small stakes. In 2007 he became a shareholder at Cadbury just before it split itself in two and is widely seen as playing a key role in pushing the confectionery business into the arms of Kraft in 2010.

Maximum financial rewards

In this case, however, analysts are not predicting a split of Danone, despite believing this would reap maximum financial rewards.

Instead, Espirito Santo Investment Bank Research said it was far more likely that Peltz would hone in on productivity levels.

"From a financial standpoint, we believe a split of the business would deliver maximum upside. Dairy, Water and Baby and Medical Nutrition are three business units with unique strategic market shares in very profitable and growing categories," said Espirito Santo Investment Bank Research. "These franchises would be very profitable on a standalone basis."

But it predicted they wouldnvt stay independent for long, claiming competitors would snap them up because of their strategic worth.

The analysts added: "It is far more likely that there will be a focus on Danone’s underperforming productivity measures where key metrics such as sales per factory and sales per employee lag significantly behind the peer group."

It also said Peltz’s desire to return cash to shareholders was welcome, not least because Danone is "highly cash generative".

'Above-average margins'

Worldwide Group Danone has two subsidiaries in the UK: the fresh dairy business Danone UK and Danone Waters UK & Ireland.

For his part, Peltz says the firm’s product line up should enable it to deliver above-average margins by developing a more balanced approach to growing profitability, as well as sales.

Its growing presence in emerging markets will also help.