Danone to sell $1.9 billion Yakult stake in quest to boost shareholder returns

Danone brands include Activia and Actimel as well as Evian water. (Reuters)
Updated 14 February 2018
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Danone to sell $1.9 billion Yakult stake in quest to boost shareholder returns

PARIS: French foods group Danone is to sell a €1.5 billion stake in Japanese company Yakult in its latest initiative to boost shareholder returns.
Leading consumer groups including Danone, the world’s largest yoghurt maker, as well as Nestle and Unilever, have come under pressure from some shareholders who say they should be producing better returns.
Danone, whose brands include Activia and Actimel as well as Evian water, said it would sell 14 percent of Yakult, equating to two-thirds of its holding, as part of a strategy to have a more disciplined approach to how it invests its capital.
Gregoire Laverne, a fund manager at Roche Brune Asset Management which owns Danone shares, said the move was positive.
“Danone is sending a strong signal,” Laverne said. “It is meeting its commitments for a better capital allocation. Now the question is: what will it do with the cash?“
Danone said it would comment further on the possible use of the proceeds when the deal is completed in March.
It has held the Yakult stake for more than a decade but there has long been speculation it would look to divest. The sale will be carried out via a market transaction initiated by Yakult and is expected to be settled in March.
Danone has lagged the growth of some rivals, largely due to weakness in its European dairy business in the face of sluggish demand and private-label competition.
“Indiscriminate investment has been one of the big turn-offs of the Danone investment case since the acquisition of Numico in 2007. Consequently we regard this as a positive development,” wrote RBC Capital Markets analysts, retaining a “sector perform” rating on Danone and a price target of €65.
Even though consumer goods groups typically offer up reliable sales and dividends, they have also had to grapple with a slowdown in some markets, pressure on prices and shifting trends from consumers over eating and leisure habits.
Danone last year bought US organic food maker WhiteWave for $12.5 billion in a bid to attract affluent health-conscious customers and boost margins. It also sold dairy business Stonyfield to Lactalis for $875 million.
Danone has sometimes been touted as a takeover target. In August 2017, hedge fund Corvex Management bought a 0.8 percent stake, following similar steps at Nestle and Procter & Gamble .
In 2005, the French government stepped in to fend off a rumored bid by Pepsico by publicly describing Danone’s business as a protected “strategic” industry.
Yakult also announced a ¥36 billion share buyback in which Danone will participate. The French group will retain a 7 percent stake in Yakult, remaining its largest shareholder.


Saudi energy minister compares electric vehicle ‘hype’ to peak oil misconceptions

Updated 54 min 46 sec ago
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Saudi energy minister compares electric vehicle ‘hype’ to peak oil misconceptions

  • Khalid Al-Falih on Monday questioned what he described as the “hype” of the electric vehicle market
  • Compared it to past misconceptions around the theory of peak oil

LONDON: Saudi Energy Minister Khalid Al-Falih on Monday questioned what he described as the “hype” of the electric vehicle market and compared it to past misconceptions around the theory of peak oil.
He told the CERAWeek energy gathering by IHS Markit in New Delhi that petrol and diesel engines would co-exist with emerging electric and hydrogen fuel cell technologies for much longer than widely expected.
Miscalculations around the pace of electrification could create “serious” risks around global energy security, he said.
“Conventional vehicles today, despite all the hype, represent 99.8 percent of the global vehicle fleet. That means electric vehicles with 0.2 percent of the fleet, only substitute about 30,000 barrels per day of oil equivalent of a total global oil demand of about 100 million barrels.
“Even if those numbers increase by a factor of 100 over the next couple of decades, they would still remain negligible in the global energy mix.”
He said: “History tells us that orderly energy transformations are a complex phenomenon involving generational time frames as opposed to quick switches that could lead to costly setbacks.”
In another broadside aimed at electric vehicles, the Saudi energy minister highlighted past misconceptions about global energy demand growth — and specifically the notion of “peak oil.”
“I remember thought leaders within the industry telling us that oil demand will peak at 95 million barrels per day. Had we listened to them and not invested . . . imagine the tight spot we would be in today.”
“Let’s also remember that in many parts of the world, roughly three fourths of the electricity, which would also power electric vehicles, is currently generated by coal, including here in India. So you could think of any electric vehicle running in the streets of Delhi as essentially being a coal-powered automobile.”
“When it comes to renewables, the fundamental challenge of battery storage remains unresolved — a factor that is essential to the intermittency issue impacting wind and solar power. Therefore the more realistic narrative and assessment is that electric vehicles and renewables will continue to make technological and economic progress and achieve greater market penetration — but at a relatively gradual rate and as a result, conventional energy will be with us for a long, long time to come.”