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.


Davos organizer WEF warns of growing risk of cyberattacks in Gulf

Updated 16 January 2019
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Davos organizer WEF warns of growing risk of cyberattacks in Gulf

  • Critical infrastructure such as power centers and water plants at particular risk, says expert
  • Report finds that unemployment is a major concern in Bahrain, Egypt, Morocco, Oman and Tunisia

LONDON: The World Economic Forum (WEF) has warned of the growing possibility of cyberattacks in the Gulf — with Saudi Arabia, the UAE and Qatar particularly vulnerable.

Cyberattacks were ranked as the second most important risk — after an “energy shock” — in the three Gulf states, according to the WEF’s flagship Global Risks Report 2019.

The report was released ahead of the WEF’s annual forum in Davos, Switzerland, which starts on Tuesday.

In an interview with Arab News, John Drzik, president of global risk and digital at professional services firm Marsh & McLennan said: “The risk of cyberattacks on critical infrastructure such as power centers and water plants is moving up the agenda in the Middle East, and in the Gulf in particular.”

Drzik was speaking on the sidelines of a London summit where WEF unveiled the report, which was compiled in partnership with Marsh and Zurich Insurance.

“Cyberattacks are a growing concern as the regional economy becomes more sophisticated,” he said.

“Critical infrastructure means centers where disablement could affect an entire society — for instance an attack on an electric grid.”

Countries needed to “upgrade to reflect the change in the cyber risk environment,” he added.

The WEF report incorporated the results of a survey taken from about 1,000 experts and decision makers.

The top three risks for the Middle East and Africa as a whole were found to be an energy price shock, unemployment or underemployment, and terrorist attacks.

Worries about an oil price shock were said to be particularly pronounced in countries where government spending was rising, said WEF. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to $88 a barrel, 26 percent above the IMF’s October 2017 estimate, and also higher than the country’s medium-term oil-price target of $70–$80.

But that disclosure needed to be balanced with the fact that risk of “fiscal crises” dropped sharply in the WEF survey rankings, from first position last year to fifth in 2018.

The report said: “Oil prices increased substantially between our 2017 and 2018 surveys, from around $50 to $75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each $10 increase in oil prices should feed through to an improvement on the fiscal balance of 3 percentage points of GDP.”

At national level, this risk of “unemployment and underemployment” ranked highly in Bahrain, Egypt, Morocco, Oman and Tunisia.
“Unemployment is a pressing issue in the region, particularly for the rapidly expanding young population: Youth unemployment averages around 25 percent and is close to 50 percent in Oman,” said the report.

Other countries attaching high prominence to domestic and regional fractures in the survey were Tunisia, with “profound
social instability” ranked first, and Algeria, where respondents ranked “failure of regional and global governance” first.

Looking at the global picture, WEF warned that weakened international co-operation was damaging the collective will to confront key issues such as climate change and environmental degradation.