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Unions at Danone, the French food giant, were trying to play an ace political card last night to prevent the $6 billion (£3 billion) sale of the group’s biscuit division to Kraft, its American rival.
The move came after staff representatives had been summoned to a meeting, to be held today, on the future of the biscuit unit. Danone is understood to want to offload some or all of the division to focus on drinks and dairy products and to pursue an ambition to become “the Coca-Cola of yoghurt”.
Kraft, the owner of Nabisco, is seen by analysts in Paris as the most likely purchaser, ahead of Kellogg’s.
However, union leaders are seeking to stop the sale by striking a patriotic chord, as they did when PepsiCo was rumoured to be planning a hostile bid for Danone in 2005. “We want to stay French,” said Yves Savoyat, head of the works council at Lu, which accounts for almost half the sales of Danone’s biscuit division.
“Danone is one of the pillars of our agroalimentary industry and if all that goes to the United States; we know what our future will be like. There’s no doubt we would be knocked about.”
The issue is sensitive because Lu, founded in 1886, has fed generations of schoolchildren in France and is firmly rooted in the national identity. However, investors would welcome its sale because of limited potential for growth in the Danone biscuit unit. Its revenue fell to €2.19 billion last year from €2.36 billion in 2005.
Wall Street analysts predicted that such a deal would trigger competition concerns. Eric Katzman, food analyst at Deutsche Bank in the United States, said: “We note that an antitrust review would likely be intense in a number of European countries.” Because of the size of such a deal, the European Commission would review it automatically.
It would mean that Kraft merges its Nabisco brand with Danone’s biscuit operations, bringing under one roof brands such as Lu and Prince from Danone with Kraft’s Oreo cookies and Ritz biscuits.
Mr Katzman said that there was “clear logic” for Kraft to acquire Danone’s biscuit business, which is valued by Deutsche Bank at about $6 billion on the basis of 12 times forecast earnings.
Some European analysts speculated last night that the sale of the Danone biscuit operations – which accounted for 18 per cent of group sales last year – could make the holding company vulnerable to a takeover. Last week, Nelson Peltz, the activist shareholder, was thought to have taken a 3 per cent stake in Kraft. However, Triarc, his investment vehicle, has still to lodge a filing with the Securities and Exchange Commission to confirm the holding, which would be worth $1.7 billion.
Kraft refused to comment and Triarc did not return calls. Danone shares, traded in Paris, closed up 93 cents to €60.95. Kraft stock, traded on Wall Street, was 21 cents higher at $35.46 in lunchtime trading.
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