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What's going on?
Venti half-caf latte with almond milk anyone? Danone, the massive French dairy company, has agreed to buy US organic-foods producer WhiteWave Foods for about $10 billion. WhiteWave owns brands such as Horizon Organic milk and plant-based milk brands (amongst other things). Its a reminder that some corners of the food and beverage market are still growing nicely.
What does this mean?
Danone, like many food and beverage giants, has struggled to increase its revenue and profit in recent years. The amount of money that people spend on packaged food isnt really increasing at least in developed markets like the US and Europe. But it seems that many of us are prepared to spend more of our money on funky options like soy or almond milk and organic dairy products. WhiteWave has been one of the fastest growing food companies in the US in recent years because it focuses on the specialty portion of the market. And, for Danone, its easier and quicker to buy that sort of growth than to develop it themselves.
Why should I care?
For the stocks: Both stocks were up on the news which is a sign that investors liked the deal. WhiteWaves stock jumped about 20% as Danone agreed to pay a significant premium to take them over. But Danones stock price also got a boost (of about 2%), which presumably means investors think its a smart move for Danone.
The bigger picture: Brexit hasnt stopped big acquisitions. Despite the uncertainty following the Brexit vote companies arent standing still. Danone can still borrow extremely cheaply (because interest rates are so low, especially in Europe) and so raising money to pay for this acquisition is quite easy. Also, if Europe is going to be a shakier place to do business in the coming years, it makes sense for a big European company such as Danone to increase their presence in the relatively healthier US of A.
Originally posted as part of the Finimize daily email.
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