August 17, 2010

Danone sells stakes in Wimm Bill Dann Foods

Danone has agreed to sell its 18.4% stake in Wimm Bill Dann Foods back to the company for EUR470 million (US$603 million) following the decision to link up with Russian rival Unimilk.

The sale of the stake will close once Danone has the necessary regulatory approvals for the merger of its CIS operations with Unimilk.

Danone announced last month that it had agreed to merge its Russian and CIS dairy business with that of Unimilk to create a new entity with annual sales of about EUR1.5 billion (US$1.93 billion).

Under the terms of that deal, Danone will control a 57.5% interest in the new entity, which will count 18,000 employees with operations in Russia, Ukraine, Kazakhstan and Belarus. The Danone-Unimilk business will inherit a 21% market share in Russia.

As a result of the Unimilk deal, Danone will increase its net debt by EUR1.3 billion (US$1.67 billion). Selling its share in Wimm Bill Dann Foods is therefore a way of improving the health of its balance sheet.

As for Wimm Bill Dann Foods, it is an opportunity to buy back shares at a discount. In addition, the Russia company has enough spare cash to be able to fund the transaction from existing resources, without the need for additional financing.