Groupe Danone - Protecting Danone

Protecting Danone

Due to its narrow focus and relatively small size, Danone is potentially an attractive takeover target for its competitors, namely Nestlé and Kraft Foods. In mid-July 2005, the share price of Danone rose 20% within two weeks on rumours of a bid approach by PepsiCo, although this intention was denied. Upon realising that a takeover of a national treasure such as Danone by a foreign company was indeed possible in the capital markets, the "economically patriotic" French government stepped in by drafting a law to protect companies in "strategic industries" such as Danone from takeover. This has been dubbed the "Danone Law".

Speculation was renewed once again in mid-2006, when PepsiCo declared its intention to grow significantly in France through a sizeable non-hostile acquisition, and Kraft was also reported in Le Figaro, a French daily newspaper, as not having ruled out an acquisition on French soil. The stock market apparently marked down the possibility of a bid by PepsiCo following Danone's acquisition of Numico.