July 3 (Bloomberg) -- Kraft Foods Inc. plans to buy Groupe Danone SA's biscuit unit for 5.3 billion euros ($7.2 billion) to become Europe's largest maker of cookies.

Kraft, the world's second-biggest food maker, will add Danone's Petit Ecolier chocolate biscuits and TUC crackers to its own Oreo and Ritz brands. Chief Executive Officer Irene Rosenfeld, who took over in June 2006, intends to expand outside the U.S. and may be pushed to accelerate acquisitions by Nelson Peltz, the billionaire investor who owns 3 percent of Kraft.

Kraft, based in Northfield, Illinois, ``could use a boost in its growth rate,'' said Brooks Cullen, who helps manage $10 billion, including 1.1 million Kraft shares, at Schafer Cullen Capital Management Inc. in New York. ``It never hurts to get somebody in there to stir things up a little bit.''

Danone's cookie and crackers division had sales of 2.2 billion euros last year, a 3.1 percent increase. The French company's shares rose on speculation Danone will use the cash to press expansion in healthier foods. Shares of Royal Numico NV, Europe's largest baby-food maker, rose on speculation that Danone may be interested in buying the company.

Rosenfeld, 54, told analysts in February that Kraft plans to repurchase $5 billion in shares before March 30, 2009, leaving enough capital for acquisitions.

Peltz, who owns 3 percent of the food maker, hasn't disclosed any plans he may have for Kraft. The company was spun off by Altria Group Inc., the maker of Marlboro cigarettes, in March. Peltz declined comment on Kraft, spokeswoman Carrie Bloom said.

`Global Platform'

Rosenfeld declined to say whether she has talked to Peltz.

``We are happy to have conversations with any and all potential and current investors,'' Rosenfeld said in an interview.

``Kraft lacks a global platform,'' Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, said before today's announcement. He manages 1.8 million Kraft shares among more than $3.5 billion in assets.

Danone shares jumped as much as 2.55 euros to 63.50 euros and were up 76 cents, or 1.3 percent, to 61.71 euros in Paris.

Shares of Kraft fell 87 cents, or 2.5 percent, to $34.66 at 1:22 p.m. in New York Stock Exchange composite trading. The stock has increased 11 percent since Rosenfeld, the former head of PepsiCo Inc.'s Frito-Lay division, took over in June 2006.

PepsiCo shares have increased 10 percent over that period while the stock of Nestle SA, the world's largest food company by revenue, has climbed 25 percent.

Revenue Gains

Kraft's revenue rose 5.7 percent in the three months through March, the fastest growth in five quarters, after Rosenfeld increased advertising of DiGiorno Ultimate frozen pizza and other new products.

Acquiring the Danone unit will give Kraft $13 billion in global revenue from snacks, its fastest-growing category, Rosenfeld told analysts on a conference call.

Kraft plans to finance the transaction by borrowing, prompting Moody's Investors Service to put $13 billion of the foodmaker's debt under review for possible downgrade.

Standard & Poor's cut its outlook for Kraft's debt to negative from stable, citing the increased debt.

Moody's rates Kraft debt Baa1, three steps above high- yield, high-risk junk. S&P rates it A, five levels above junk.

`Cornerstone to Expand'

Snacks will account for 35 percent of Kraft's total sales, up from 29 percent before the Danone transaction. Kraft will have the largest cookie and cracker market share in Europe and vault from second to first in its share of revenue in Asia.

The purchase will ``serve as a cornerstone to expand to emerging markets,'' Rosenfeld said. The new unit will double Kraft's sales in China and put the company in Russia, Indonesia and Malaysia, she said. When asked if Kraft would sell any assets, she said Kraft may ``rethink'' some brands.

None of the Danone unit's factories in France will be closed for at least three years. Danone's main cookie business, LU, has about 15,000 employees and its global sales grew 3.1 percent last year.

Besides LU, Danone is selling brands including Petit Dejeuner, Cracotte and Ourson. The sale excludes Danone's stakes in biscuit businesses in India and Latin America.

``The price is largely above our expectations,'' said Jean- Marie L'Home, an analyst at Paris-based Aurel-Leven who has a ``buy'' recommendation on Danone stock. ``Danone was in a position to negotiate, and it showed.''

Management Structure

Georges Casala, who runs Danone's biscuit division, will take charge of Kraft's cookies and crackers unit in the European Union. That includes Fontaneda, Filipinos and other brands Kraft bought last year from U.K.-based United Biscuits Group.

Revenue in EU countries climbed 19.3 percent to $1.75 billion in the three months through March, accounting for 20 percent of Kraft's sales. Without the acquisition and currency gains, revenue rose 2.9 percent, the company said April 18.

Kraft's revenue rose an average 3.3 percent over the past five years, trailing gains of 7.6 percent by Kellogg Co. and 16 percent by General Mills Inc., the maker of Cheerios cereal.

Danone, which also bottles Evian water, can now ``fully concentrate'' on dairy and mineral-water drinks, ``two fast- growth categories of food products with a strong health orientation,'' Danone Chief Executive Officer Franck Riboud said in the statement.

Riboud also raised the company's sales-growth target to 7 percent to 9 percent, excluding the cookie unit. That's an increase from the previous forecast of 6 percent to 8 percent.

The cookie maker was founded in 1846 in the French city of Nantes. Some of its posters were made by art-nouveau painter Alphonse Mucha, known for his posters of actress Sarah Bernhardt.

The top-selling U.S. cookie is the Oreo, introduced in 1912 and part of Kraft's Nabisco unit.

Lazard Ltd. advised Danone, and Kraft received advice from Goldman, Sachs & Co.

To contact the reporter on this story: Ladka Bauerova in Paris at lbauerova@bloomberg.net; Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.

Last Updated: July 3, 2007 16:10 EDT