Danone $12.5bn WhiteWave acquisition ‘comes as no surprise’ say industry specialists

WhiteWave’s business includes Silk, So Delicious, Vega, Alpro, Provamel, Horizon Organic, Wallaby Organic, Earthbound Farm and International Delight

Danone has entered into an agreement to acquire The WhiteWave Foods Company (WhiteWave) for approximately $12.5bn, with the transaction expected to close at the end of the year.

WhiteWave is a global company which generated $4bn in sales in 2015 and has a portfolio of brands in North America and Europe in high-growth, on-trend food and beverage categories that focus on premium organic dairy, non-GMO, plant-based alternatives to milk and yogurt, fresh foods, and coffee creamers.

'The perfect alliance'

WhiteWave’s business includes Silk, So Delicious, Vega, Alpro, Provamel, Horizon Organic, Wallaby Organic, Earthbound Farm and International Delight.

WhiteWave has been the fastest growing food and beverage company in the US and one of the fastest growing in Europe for the past four years.

Since becoming a public company in 2012, sales have increased at a 19% compound annual growth rate through 2015, and the firm has doubled its operating income during this period.

Emmanuel Faber, CEO, Danone, said the deal will allow the company to grow in North America with a broader platform and ‘accelerate our path towards strong sustainable and profitable growth by 2020.’

Danone expects the transaction to be solidly accretive to Danone’s earnings within the first year after closing and to be above 10% accretion based on expected run-rate synergies. The transaction is expected to result in approximately $300mn of EBIT synergies by 2020.

At Danone, we believe we have a special responsibility to help and support people in adopting healthier and more sustainable eating and drinking practices and constantly evolve our portfolio of brands and products to achieve this objective,” he said.

We found in WhiteWave the perfect alliance as we both believe in a healthier future and are conscious of our power to lead society forward.”

Julian Mellentin, director and founder, New Nutrition Business, told DairyReporter, the deal ‘comes as no surprise’

'Danone will not have a monopoly'

"Forward-thinking dairy companies already appreciate that having a non-dairy business like soy or almond milk is not only no conflict with a mainstream dairy business, the two are entirely complimentary,” he said.

Those dairy companies - such as farmer-owned co-operatives in particular - who see plant-based dairy just as competition and not as an opportunity are doing their shareholders a dis-service and making a strategic mistake which they will come to regret.

"Danone will be the market leader but it will not have a monopoly. There are tens, perhaps hundreds, of small high-growth companies operating in the plant-based dairy space and they are already taking share from WhiteWave.

In the US, retailers encourage these smaller companies so that intensifies the competition. In a high-growth segment like this that's normal. As the market leader Danone will be a responsible player - that's their culture - and it is likely to let WhiteWave continue to operate as a separate entity and keep its own culture while enabling it to grow faster in global markets by providing access to Danone's global network and significant R&D capability."

Caroline Roux, research analyst, Food and Drink EMEA, Mintel, said Danone's acquisition of WhiteWave is exciting news because the firm 'is moving where consumers want to them go.' 

"Plant-based milks and yogurts have escaped the realm of serving as substitutes primarily for people with dietary concerns, consumers with allergies and followers of vegetarian or vegan diets. These products now have a broader appeal; they have convinced consumers of their health and taste credentials. Moreover, the recent launch of Ben & Jerry's almond milk-based ice creams is bringing new dimensions to the plant-based milks and yogurts category: indulgence and fun," she added.

"In the US, plant-based milks are well established with 58% of consumers who consumed non-dairy milk in the past three months to January 2016. Amongst them, nine in 10 also drank dairy milk, suggesting a very limited number of consumers drink non-dairy milk out of necessity.

"In Europe, plant-based milks and yogurts are less established. However, they are moving to the mainstream. Mintel's data reveals in Danone's home country, France, 31% of consumers think non-dairy yogurts are as tasty as dairy yogurts.

"Let's not forget the opportunities in China where plant-based drinks are a staple."

Franck Riboud, chairman, Danone, believes WhiteWave’s size, positioning and geographical footprint fit perfectly with Danone's strategy and it is the right transaction at the right time.

The transaction will create a leading US refrigerated dairy player, as well as one of the top 15 largest US Food and Beverage manufacturers. Following the closing of the transaction, Danone’s North America footprint would increase from 12% to 22% of Danone’ total portfolio.

Gregg Engles, CEO, WhiteWave

The Danone Board will propose that shareholders approve the appointment of Gregg Engles, chairman/CEO, WhiteWave as a member of its Board upon completing the transaction.

Danone and WhiteWave will establish a team to prepare for and to oversee the transition of the businesses. 

Today’s announcement is an exciting next chapter for WhiteWave, bringing together two leading companies with a shared mission of changing the way the world eats for the better,” said Engles. 

We believe this is a compelling transaction that delivers significant cash value to our shareholders. Danone is a unique company with distinctive capabilities that will enable WhiteWave to reach its next phase of growth.

Danone is a great cultural fit for our organization and I am excited for our employees to benefit from the opportunities presented by joining Danone, a leading global food company and the ideal strategic partner to support our future.”

According to Lianne van den Bos, senior analyst, Euromonitor International, Danone’s acquisition of WhiteWave Foods is the latest example of big food companies going on a health drive as demand for healthy food continues to transform the food industry.

"Nestlé’s recently appointed CEO with a background in the medical industry is a testimony to Nestle’s goal to redefine itself as a nutrition and health company. Also Mars’ recommendation for consumers to use its pasta sauces only once a week, is an example of the drastic measures food companies are taking to appeal to a new generation of consumer who want simpler, less processed healthy foods," she said.

"Whilst WhiteWave is far from a start-up company, its focus on health positioned products like almond and other nut-based beverages has helped them climb the dairy ladder in the US quickly - it is now the fourth largest dairy company. Indeed, this acquisition will boost Danone’s presence in North America in the short run, but also offer overseas potential in the long run. WhiteWave could use Danone’s existing distribution network in China to expand its Silk brand to a non-dairy milk alternative market 10 times the size of the US and turnaround Danone’s growth trajectory in the country.”

The transaction is subject to WhiteWave shareholders approval, receipt of required regulatory approvals, including in the European Union and the US and other customary closing conditions.

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