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.


German economy defies trade gloom with strong growth

Updated 8 min 14 sec ago
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German economy defies trade gloom with strong growth

  • Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period
  • Economists had forecast a 0.4 percent increase this time

BERLIN: The German economy accelerated in the second quarter despite the US move to impose new tariffs on Europe, official data showed Tuesday, performing slightly better than economists had expected.
Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period. That is up from 0.4 percent in the first quarter — a figure that was revised upward Tuesday from the initial reading of 0.3 percent given in May. Economists had forecast a 0.4 percent increase this time.
Its performance in the April-June period was helped by higher private and government spending and by increased investment in equipment and construction, the Federal Statistical Office said. Rising exports were outpaced by increasing imports.
The figure underlined the German economy’s continuing robust performance, with business confidence high and unemployment low despite some disappointing data on factory orders this year and concern about global trade tensions.
It has now grown for 34 of the past 37 quarters, said Carsten Brzeski, an economist at ING in Frankfurt, but he cautioned that “the challenges facing the German economy will increase rather than decrease.”
Those include the specter of a possible escalation of trade tensions, despite a recent deal to defuse a US-European Union dispute, geopolitical risks such as that posed by events in Turkey and a shortfall in investment and structural reforms at home, he said.
In year-on-year terms, the economy expanded by 2.3 percent in the second quarter.