Danone to sell US$1.9bn Yakult stake amid shareholder pressure

By Cheryl Tay

- Last updated on GMT

Danone will sell the equivalent of two-thirds of its holding as it seeks to shift its investment strategy.
Danone will sell the equivalent of two-thirds of its holding as it seeks to shift its investment strategy.
Danone is to sell US$1.9bn of its shares in Yakult, which it has held for over 10 years, in the hope of improving shareholder returns.

The French manufacturer has confirmed that it will sell the equivalent of two-thirds of its holding as it seeks to shift its investment strategy.

The sale is expected to be completed by March; Danone's stake will drop from 21% to 7%, although it will remain Yakult's largest single shareholder.

Fund manager Gregoire Laverne of Roche Brune Asset Management, owner of Danone's shares, told Reuters​: "Danone is sending a strong signal. It is meeting its commitments for a better capital allocation. Now the question is: what will it do with the cash?"

However, Danone has chosen to keep mum on the potential purpose of the proceeds until the deal is completed in March. The firm will continue continue distributing Yakult products, with new plans in the pipeline for Europe, where Spain has been pegged as an initial test market.

Under pressure

Like other major manufacturers such as Nestlé and Unilever, Danone is facing pressure from shareholders who expect higher returns.

Danone's growth has fallen behind that of some of its competitors, mainly because of its European dairy business, which has been hit by weak demand and competition from private labels.

Despite the general reliability of consumer goods companies in terms of sales and dividends, market slowdown, shifting trends, and pressure on prices have affected such firms.

Ups and downs

Danone's business and investment history — both in terms of its shareholders and its stakes in other firms — has been varied.

Between 2012 and 2013, its Dumex China business saw sales reduced by more than four times, thanks to a food safety scare.

Three years later, Danone decided to withdraw​ its Dumex infant nutrition products from Vietnam, as its market share was not substantial enough to warrant continued investment.

Since then, however, the firm's business in China — albeit not under the Dumex brand — has picked up: its Q3 sales last year​ grew to US$7.5bn, thanks largely to Chinese demand for its specialised nutrition business.

But while it has been expanding in India — having launched its infant formula brand Aptamil​ in the country last year and releasing Yakult Light​ under the Yakult Danone joint venture just last week — it also recently closed its dairy business in India​, citing minor contribution to its yearly revenue and a shift of focus to its nutrition portfolio instead.

Just last year, it bought US organic food manufacturer WhiteWave for US$12.5bn, in an attempt to appeal to health-conscious consumers and increase profits. In addition, it sold dairy firm Stonyfield to Lactalis for US$875m.

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