Danone to buy U.S. soy-milk maker WhiteWave for $10 billion

Danone agreed to buy WhiteWave Foods Co. for about $10 billion to add the best-selling U.S. soy milk brand Silk and expand in organic food in its biggest acquisition in almost a decade.

Investors will receive $56.25 a share in cash, Danone said in a statement Thursday. That’s 19 percent higher than WhiteWave’s closing price Wednesday. WhiteWave began trading in 2012 after U.S. dairy company Dean Foods Co. spun off the unit, which was its most profitable business.

The acquisition would make Danone the global leader in fresh dairy and health-food brands including Horizon milk, Wallaby Organic yogurt and Earthbound Farm packaged salads as consumers increasingly shun processed foods perceived as unhealthy.

WhiteWave’s Silk is the biggest-selling soy milk brand in the U.S., benefiting from a shift to dairy alternatives like almond milk. The deal is the second potential takeover in the food industry in recent weeks, following Mondelez International Inc.’s advance towards Hershey Co., which the chocolate maker snubbed.

“A potential takeout of the company has been part of our investment thesis since its spinoff from Dean Foods four years ago,” wrote Christopher Growe, an analyst at Stifel. “It is likely this potential transaction further fuels the acquisition speculation gripping the food stocks, pushing multiples even higher.”

The WhiteWave purchase, to be funded through debt, will boost results in the first year after closing, the French maker of Activia yogurt said. Danone expects a $300 million boost to operating profit by 2020.

“The purchase will allow us to double the size of our U.S. business and become the world leader in organic,” Danone Chief Executive Officer Emmanuel Faber said on a conference call with journalists. WhiteWave CEO Gregg Engles will join Danone’s board.

Sales at Denver-based WhiteWave will increase about 11 percent this year, based on the average of analyst estimates, after doubling since 2010 on rising demand for more healthful beverages and food, data compiled by Bloomberg show. North America accounted for 86 percent of the company’s $3.9 billion in revenue last year, with Europe contributing the rest, according to data compiled by Bloomberg.

Growth like that doesn’t come cheap — Danone is paying about 26.2 times earnings before interest, tax, depreciation and amortization for WhiteWave, according to data compiled by Bloomberg. That’s well above the median multiple of 14.8 times earnings paid by buyers in acquisitions of dairy companies over the past five years, the data show.

“This does all smell rather like Danone of old: business trends start to wobble, and the checkbook is taken out to acquire a high-growth business that would appear to never cover cost of capital,” wrote Jeff Stent, an analyst at Exane BNP Paribas. In 2007, Danone paid a hefty multiple to purchase baby-food maker Royal Numico.

Danone, which makes Oikos Greek-style yogurt and Evian water, is targeting sales growth of more than 5 percent by 2020, with half of its business keying in on consumers seeking healthy-eating alternatives. North American sales will be 22 percent of Danone’s total revenue after the purchase, compared with 12 percent now.

“Danone will have one of the most extensive portfolios of brands and products in fresh dairy, organic foods and beverages and plant based alternatives to milk and yogurt,” wrote Alain Oberhuber, an analyst at MainFirst.

The purchase values WhiteWave at $12.5 billion including net debt and other liabilities. The shares have jumped 22 percent this year to close at $47.43 in New York trading Wednesday. Danone has increased 1.7 percent this year. The companies expect to complete the deal this year.

In 2007, Danone paid 12.3 billion euros for Schiphol, Netherlands-based Royal Numico, a Dutch maker of baby-food and products for people whose diets are restricted by illnesses.

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