Danone Agrees to Renewed Alliance With Yakult on Yogurt

Danone, owner of the Evian water and Activia yogurt brands, said a takeover of Yakult Honsha Co. is “not on the agenda” after a nine-year-old agreement that prevented it from raising its stake was replaced with a new one.

The trust that has developed between the companies since the original cooperation agreement was signed in 2004 means there’s no longer a need for a formal restriction on Danone’s 20 percent stake in the Japanese milk drinks producer, spokeswoman Agnes Berthet-d’Anthonay said today by phone.

Nikkei newspaper reported earlier today that Paris-based Danone may increase its stake to 36 percent. The world’s largest yogurt maker had sought to increase its holding after the original agreement was signed to boost its business in Asia, only to have Yakult oppose the proposed increase.

“In theory, Danone could take over Yakult, however the company has made clear it has no interest in doing so,” Jon Cox, an analyst at Kepler Capital Markets in Zurich, said by phone. “They plan to deepen their ties.”

Under the new agreement, Danone will keep three of its representatives on Yakult’s board, it said today.

“This framework does not contain commitment or limitation regarding Danone’s equity interest in Yakult,” Danone said.

The companies have cooperated on product research and promotion, and may extend collaboration “into areas that are more operational in nature,” Danone also said.

‘No Interest’

James Edwardes Jones, an analyst at RBC Capital Markets, said he would view any approach by Danone for Yakult “with concern” given the Japanese company’s valuation and expects a status quo for the time being. Yakult is trading at 43 times its estimated earnings, according to Bloomberg data.

The 80 percent of Yakult that Danone doesn’t own is worth about 5 billion euros ($6.5 billion) and would cost the French company about 6 billion euros with a control premium, Alex Molloy, an analyst at Credit Suisse Group AG, estimates.

Yakult plunged as much as 15 percent today in Tokyo trading after Nikkei reported the companies had dissolved their initial agreement. The shares trimmed the decline to 5.7 percent to close at 4,420 yen after the report that Danone may increase its stake. Nikkei didn’t say where it got the information.

Joint Ventures

Yakult confirmed the dissolution of the 2004 agreement and the formation of a new one after the Nikkei report.

“Our friendship with Danone deepened through the nine years of tie-up, but we couldn’t bridge the gap between us,” Yakult Chairman Sumiya Hori said at a press conference in Tokyo today. Yakult won’t rule out possible tie-ups with other companies, President Takashige Negishi said.

The companies won’t end joint ventures in India and Vietnam, Berthet-d’Anthonay said, commenting on the Nikkei report. Cooperations from the previous agreement will continue.

Yakult’s so-called probiotic and fermented milk drinks are similar to offerings from Danone.

Danone dropped 0.9 percent to 57.87 euros at 12:35 p.m. in Paris trading. The company gets more than half its revenue from fresh dairy products. Sales at the division rose 0.7 percent on a like-for-like basis in the first quarter as conditions in Europe remain “difficult,” Danone said April 16.