Yogurt giant Danone to sell Chinese unit in bid to appease activist investors

French food group Danone said on Sunday it would sell its stake in China Mengniu Dairy Company and return the proceeds to shareholders. The Danone
board will meet on Monday to debate a response to increasing pressure from activist funds.

  • The maker of Evian and Volvic bottled water and Actimel yogurt will first convert its indirect stake in Mengniu into a holding company detaining 9.8% of the Chinese group, then divest the stake, pending regulatory approval, before returning the proceeds to investors through share buybacks.

  • The Mengniu stake is worth about $2 billion at current market prices.

  • Danone Chairman and Chief Executive Emmanuel Faber has been facing calls to give up one of his positions from activist funds Artisan Partners and Bluebell Capital Partners.

  • The funds also ask for a bigger divestment program, after the French company lost a fourth of its market value last year.

Read: Activist Investor Takes Aim at French Food Group Danone. What That Could Mean for the Stock.

The outlook: Faber has said he would be ready to agree on a split of the chairman and CEO positions, and the divided Danone board will have to decide on Monday how far it goes toward addressing the activists’ concerns further.

But the funds will have reasons to point out that Danone’s decision to sell its Chinese stake validates their concerns.

Danone shares are up 11% since Faber took over in October 2014. Meanwhile, rival Nestlé’s
stock has jumped 41%, and Unilever
by 45%.

From the archives (June 2020): What Danone’s CEO Says About Health Food and Having a Mission