Danone to Sell Stonyfield to Lactalis for $875 Million -- 4th Update

By Nick Kostov Features Dow Jones Newswires

French dairy company Danone SA said Monday it entered a binding agreement to sell its U.S. dairy business, Stonyfield, to Lactalis for $875 million to address U.S. competition concerns.

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The sale of Stonyfield is part of an agreement reached with the U.S. Department of Justice in connection with Danone's recent acquisition of WhiteWave. Danone and WhiteWave together have big chunks of the yogurt market with brands including Dannon, Oikos, Actimel, Silk, Wallaby and Horizon Organic, which led to concerns from the Justice Department about concentration in the dairy sector.

Danone said that the sale price represented a multiple of around 20 times the 2016 earnings before interest, tax, depreciation and amortization for Stonyfield.

Lactalis, based in the town of Laval, about 175 miles southwest of Paris, is a family-owned company whose cheese, milk and other dairy products are sold under well-known brands such as President and Bridel. It said it has 75,000 employees spread across 85 countries.

Its agreement to buy Stonyfield comes at a time when the French company faces increasing pressure to offer healthier foods as consumer tastes change. Lactalis generates half of its sales from milk, butter, creams, yogurt and desserts, while another 36% of its sales come from cheese. It is the first time that it has bought a company that is dedicated mostly to making organic products. A deal would also help Lactalis achieve its goal of expanding further into the U.S., where it has factories in Belmont, Wisconsin, and Nampa, Idaho.

Other bidders for the asset included big dairy processor Dean Foods Co., Mexico's Grupo Lala and China's largest dairy company Inner Mongolia Yili Industrial Group Co., according to a person familiar with the matter. A Yili spokesman declined to comment, while representatives for Dean Foods and Grupo Lala didn't immediately respond to requests for comment.

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Founded in 1983, Stonyfield, which was one of the pioneers in tapping consumers' growing desire for simpler, more natural products, grew to yearly revenue of around $370 million last year. Danone purchased a 40% stake in the company in 2001, and raised its share to 80% in 2004, which strengthened its position in the U.S. against Minneapolis-based competitor General Mills Inc., maker of Yoplait yogurt. Since 2014, Danone has fully owned Stonyfield.

Closing of the sale of Stonyfield is subject to final approval by the Justice Department and is expected in the third quarter of this year. Danone's $10.4 billion purchase of WhiteWave, agreed in July 2016, closed on April 12 this year.

Write to Nick Kostov at Nick.Kostov@wsj.com

Corrections & Amplifications

This article was corrected at 1:47 p.m. ET because the original version incorrectly stated the company was dedicated only to making organic products in the fifth paragraph. In addition, Stonyfield was misspelled as Stoneyfield in the penultimate paragraph.

PARIS -- French dairy company Danone SA said Monday it entered a binding agreement to sell its U.S. dairy business, Stonyfield, to Lactalis for $875 million to address U.S. competition concerns.

The sale of Stonyfield is part of an agreement reached with the U.S. Department of Justice in connection with Danone's recent acquisition of WhiteWave. Danone and WhiteWave together have big chunks of the yogurt market with brands including Dannon, Oikos, Actimel, Silk, Wallaby and Horizon Organic, which led to concerns from the Justice Department about concentration in the dairy sector.

Danone said that the sale price represented a multiple of around 20 times the 2016 earnings before interest, tax, depreciation and amortization for Stonyfield.

Lactalis, based in the town of Laval, about 175 miles southwest of Paris, is a family-owned company whose cheese, milk and other dairy products are sold under well-known brands such as President and Bridel. It said it has 75,000 employees spread across 85 countries.

Its agreement to buy Stonyfield comes at a time when the French company faces increasing pressure to offer healthier foods as consumer tastes change. Lactalis generates half of its sales from milk, butter, creams, yogurt and desserts, while another 36% of its sales come from cheese. It is the first time that it has bought a company that is dedicated only to making organic products. A deal would also help Lactalis achieve its goal of expanding further into the U.S., where it has factories in Belmont, Wisconsin, and Nampa, Idaho.

Other bidders for the asset included big dairy processor Dean Foods Co., Mexico's Grupo Lala and China's largest dairy company Inner Mongolia Yili Industrial Group Co., according to a person familiar with the matter. A Yili spokesman declined to comment, while representatives for Dean Foods and Grupo Lala didn't immediately respond to requests for comment.

Founded in 1983, Stonyfield, which was one of the pioneers in tapping consumers' growing desire for simpler, more natural products, grew to yearly revenue of around $370 million last year. Danone purchased a 40% stake in the company in 2001, and raised its share to 80% in 2004, which strengthened its position in the U.S. against Minneapolis-based competitor General Mills Inc., maker of Yoplait yogurt. Since 2014, Danone has fully owned Stonyfield.

Closing of the sale of Stonyfield is subject to final approval by the Justice Department and is expected in the third quarter of this year. Danone's $10.4 billion purchase of WhiteWave, agreed in July 2016, closed on April 12 this year.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

July 03, 2017 14:02 ET (18:02 GMT)