Why Danone Paid $10.4 Billion For Almond & Organic Milk Company

Image courtesy of Mike Mozart

French food giant Danone already takes up plenty of supermarket dairy shelf space, with everyday brands like Dannon, Activia, and Oikos. So why is the company spending $10.4 billion to purchase WhiteWave, the American company behind organic brands like Silk almond milk, Horizon, and Earthbound?

Danone announced Thursday that it would double the size of its U.S. business in a deal valued at $12.4 billion to acquire Denver-based WhiteWave Foods.

The deal, which includes about $2 billion in debt, aims to increase Danone’s presence in the highly sought after organic market.

Thursday’s announcement appears to be Danone chief executive Emmanuel Faber’s first attempt to return the company to sustainable growth — a vow he made after joining the company last year, the Wall Street Journal reports.

Analysts say the move gives Danone a ready-made foothold in the U.S.’s rapidly growing organic market.

“Packaged food is under pressure but what you’re getting is this high-end food product which is not in the discount end of the market,” Jon Cox, analyst at Kepler Cheuvreux, tells the WSJ.

Although the billion-dollar deal may seem steep, analysts say it will provide opportunities for Danone that would otherwise be unavailable.

“It’s a big price but obviously they’re buying a business with a lot more growth than in the European consumer sector,” James Edwardes Jones, an analyst for RBC Capital Markets, said.

In fact, the WSJ reports that WhiteWave has been one of the fastest-growing companies in the sector, with sales increasing by double-digits since entering the market.

“It will allow us to enhance Danone’s growth profile and reinforce our resilience through a broader platform in North America,” Faber said of the deal.

While it might be clear why Danone was attracted to WhiteWave, why would a company on the rise be interested in a merger?

For one thing, the WSJ reports that by agreeing to enter Danone’s portfolio, WhiteWave will be relieved of nearly $2 billion in debt and liabilities.

Additionally, Faber says the deal was a natural fit for the companies, as their management teams have known each other for me than 15 years.

Danone Boosts U.S. Business With $10 Billion WhiteWave Deal [The Wall Street Journal]

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