Danone targeted by activist investors

By Rick Pendrous

- Last updated on GMT

Activist investors want to drive efficiencies in underperforming food firms
Activist investors want to drive efficiencies in underperforming food firms

Related tags: Alcoholic beverage

Danone, the French food company best known for its Activia yogurt and Evian water, experienced a share price rise last month following suggestions that it could be facing renewed pressure from investors to improve its profitability and shareholder value.

It happened after news emerged that US hedge fund Corvex Management had built up a reported $400M stake in the group, which has an estimated market value of 45bn.

This development was yet another sign that investors globally were responding to slowing food sector growth, it was reported. It also followed forays by activist investors taking an increasing stake in Nestlé in June and Kraft Heinz’s failed bid for Unilever in February.

Also last month, business analyst Grant Thornton released its latest quarterly overview of recent mergers and acquisitions (M&A) activity in the food and beverage sector.

This concluded that despite political and economic uncertainty becoming the new norm, M&A in the sector remained relatively high.

A lot of interest and activity

According to Trefor Griffith, head of food and beverage at Grant Thornton, there was still a lot of interest and activity in the sector.

Grant Thornton’s analysis of the M&A statistics for 2017 to date have shown increased inward and private equity (PE) investment across the food and drink sector.

In the first half of 2017, 98 transactions took place, compared with 104 deals recorded in the first half of 2016 – a time when there was a broad assumption that the Brexit vote on June 23 would have ‘a remain’ outcome, said Griffith.

The consistent volume of deal activity implied that M&A activity in food and beverages continued to be resilient, in spite of the uncertain environment following the referendum, he added.

Griffith reported that the dominant sectors of activity remained the same in the second quarter (Q2). There were 11 deals in the alcoholic beverages sector – with spirits and craft beer leading the way – accounting for 19% of deals in Q2, half of which were cross-border transactions. The wellness trend also continued to drive high levels of activity, he said.

Increase in overseas investment

Sterling’s depreciation following last year’s referendum helped to drive an increase in overseas investment in the quarter, because investors could acquire assets at a discount, said Griffith.

Around 30% of the total deals involved UK/Irish companies transferring to overseas ownership in Q2, compared with 26% in 2016 and 21% in 2015.

“While private equity’s interest in the food and beverage and broader consumer sector is longstanding, Q2 brought an increase in PE activity,”​ reported Griffith.

“PE investment in Q2 saw 16 deals, equating to 28% of the quarter’s deals. Investment took place at all stages of investment, such as funding cold-pressed juice producer Coldpress Foods to more established groups such as savoury pastry group Addo.”

Related topics: Dairy

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