French foods group Danone is to sell a €1.5bn stake in Japanese company Yakult in its latest initiative to boost shareholder returns.
Leading consumer groups including Danone, the world’s largest yoghurt maker, as well as Nestle and Unilever, have come under pressure from some shareholders who say they should be producing better returns. Danone, whose brands include Activia and Actimel as well as Evian water, said it would sell 14% of Yakult, and hold onto 7%, as part of a strategy to have a more disciplined approach to how it invests its capital.
Gregoire Laverne, a fund manager at Roche Brune Asset Management which owns Danone shares, said the move was positive.
“Danone is sending a strong signal,” Mr Laverne said. “Now the question is: What will it do with the cash?” he said. It has held the Yakult stake for more than a decade but there has long been speculation it would look to divest. Danone has lagged the growth of some rivals, largely due to weakness in its European dairy business in the face of sluggish demand.
“Indiscriminate investment has been one of the big turnoffs of the Danone investment case since the acquisition of Numico in 2007. Consequently, we regard this as a positive development,” wrote RBC Capital Markets analysts.
Consumer goods groups have also had to grapple with a slowdown in some markets, price pressures, and shifting trends from consumers overeating and leisure habits. Danone last year bought US organic food maker WhiteWave for $12.5bn (€10bn) in a bid to attract affluent health-conscious customers. It also sold dairy business Stonyfield to Lactalis for $875m.
Danone has sometimes been touted as a takeover target. In August 2017, hedge fund Corvex bought a 0.8% stake, following similar steps at Nestle and Procter & Gamble. And in 2005, the French government stepped in to fend off a rumoured bid by Pepsico by describing Danone’s business as a protected ‘strategic’ industry.
Danone also said it was looking at distributing Yakult products in European markets. Its shares rose 1.3% at one stage. The stock had hit a record €72.13 in December, but has slipped 8% so far in 2018.