European regulator grants conditional approval to Danone's WhiteWave Foods acquisition

17 Dec 2016

The European regulator yesterday approved French yogurt giant Danone SA's acquisition of US organic food producer WhiteWave Foods Co subject to conditions.

In June, Danone agreed to buy WhiteWave for $10.4 billion in order to double the size of its business in the US. (See: Danone to buy US organic foods producer WhiteWave Foods Co for $10.4 bn) The deal is Danone's largest since it acquired Dutch baby foods group Numico in 2007 for $16.8 billion.

The European Commission (EC) cleared the deal subject to Danone selling a large part of its "growing-up milk" category in Belgium, as an acquisition would have left Nestle as the only competitor in the country.

Danone is active in the European Economic Area (EEA) mainly in dairy products but also in early life nutrition products. WhiteWave manufactures plant-based products such as soy milk and yoghurts under its Alpro and Provamel brands.

Alpro products also include plant-based "growing-up milk" (for children aged 1 to 3 years).

The EC said that its investigation revealed that the proposed transaction would leave only one other competitor, Nestlé, on the market for "growing-up milk" in Belgium. The EC had concerns that the merged entity would not have faced sufficient competitive pressure from the remaining player in this market.

The EC added that Danone has committed to address these concerns by divesting a large part of its "growing-up milk" business in Belgium.

The divestment will completely remove the overlap between the companies in Belgium on the overall "growing-up milk" market, comprising both dairy and plant-based products, as well as on the sub-market only for plant-based products.

WhiteWave Foods, earlier a subsidiary of Dean Foods till it was spun off in an IPO in 2012, is a packaged food and beverage company that manufactures and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America, Europe and through a joint venture in China.

Its brands include Silk, So Delicious, Alpro, Vega, Horizon, Wallaby Organic, Earthbound Farm and International Delight.

The Denver, Colorado-based company employs around 3,000 people and generates $3.9 billion in annual revenues.

Around 86 per cent of its annual revenues come from North America, while 14 per cent from Europe.

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

The deal will allow Danone to 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.

It also diversifies Danone's portfolio and broadens its presence in North America. The transaction will create a leading US refrigerated dairy player, as well as one of the top 15 largest US food and beverage manufacturers.

Post closing, Danone's North America footprint would increase from 12 to 22 per cent of its total portfolio.

Danone, a Fortune 500 company with 2015 revenues of over of €22.4 billion, is one of the world's most successful health food companies and the world's largest yogurt maker.

It has recently been making divestments in Europe and huge acquisitions in emerging markets, including Russia, China and India.

Emerging markets now account for 49 per cent of the company's sales, while North America contributes 10 per cent, France and Russia account for 11 per cent each.

With 160 plants and around 100,995 employees, Danone has a presence in all five continents and over 120 countries. It is No 1 in fresh dairy products, No 2 in packaged water and baby nutrition.'