Photographer: Andrey Rudakov/Bloomberg

Activist Fund Corvex Targets ‘Undervalued’ Yogurt Maker Danone

Updated on
  • Keith Meister’s hedge fund said to build $400 million stake
  • French yogurt maker has been seen as potential takeover target

Corvex Management, the activist fund run by Keith Meister, has built a stake in French yogurt maker Danone because it views the company as significantly undervalued, according to people familiar with the matter.

The New York-based hedge fund owns shares in Danone worth about $400 million, said the people, who asked not to be identified because the investment hasn’t been publicly disclosed. The stock rose as much as 2.9 percent in early Paris trading, leading gains in France’s benchmark CAC 40 Index.

Activist investors increasingly have European companies in their sights, and Dan Loeb’s purchase of a stake in Nestle SA has shown that not even the region’s biggest company is immune. Danone was previously a target in 2012, when Nelson Peltz bought a stake and pressed for tighter cost control.

“It’s incumbent on all of us as investors to be activist,” said Nicholas Melhuish, head of global equities at Amundi Asset Management. “Activists often just end up verbalising a debate that has been going on behind the scenes between other investors and the company, but they do it in a much more dramatic way.”

Keith Meister

Photographer: Andrew Harrer/Bloomberg

Corvex’s purchase would be its second high-profile European investment in as many months. The fund teamed up with investment firm 40 North last month to increase their stake in Clariant AG to more than 10 percent, part of an effort to scupper the Swiss chemical company’s $6.7 billion takeover of Huntsman Corp.

Corvex believes Danone stock will rebound if management improves operations and successfully positions the business to benefit from the health and wellness trend, the people said. The firm doesn’t currently plan to publicly push for management changes or launch a proxy fight, though that stance could change, they also said.

Shares of the Paris-based company had declined about 5 percent in the last 12 months, valuing the business at about 45 billion euros ($53 billion). Danone currently trades at 22.58 times price-to-earnings, compared with 27.37 at Nestle SA and 24.29 at Unilever NV, according to data compiled by Bloomberg.

Representatives for Corvex and Danone declined to comment.

Weak Sales

Danone’s Chief Executive Officer Emmanuel Faber is trying to rejuvenate the company after last year’s like-for-like sales growth was the weakest since 1997. While the $10 billion purchase of soy-milk maker WhiteWave Foods Co. is brightening earnings prospects, weakness in yogurt has weighed on a business that generates half the company’s revenue.

At the same time, investors in the French company may benefit from rising takeover speculation. Danone would “make sense” as a target for Kraft Heinz Co. because it is “a relatively cheap under-earning asset,” Exane BNP Paribas analysts including Jeff Stent wrote in a note in June. Other possible suitors include PepsiCo Inc. and Coca-Cola Co. The longstanding wisdom that Danone is immune from a take-out is no longer valid amid the shift in the French political landscape, the analysts wrote.

European consumer companies have become a focus for activists since Loeb’s hedge fund Third Point announced in June that it had amassed a $3.5 billion stake in Nestle. This month, an activist called on Dutch soft-drink bottler Refresco Group NV to start a strategic review and Elliott Management Corp. lost a second lawsuit aimed at removing Akzo Nobel NV’s chairman.

Meister, who previously worked for billionaire activist investor Carl Icahn, formed Corvex at the end of 2010. As of the end of March, the New York-based investment firm also had active positions in oil exploration and production company Energen Corp., online radio firm Pandora Media Inc., and Yum! Brands Inc., the parent company of KFC and Taco Bell, according to regulatory filings.

— With assistance by Aaron Kirchfeld, Manuel Baigorri, and Thomas Buckley

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