A Friday, October 17th article from Reuters claims that French yogurt-maker and food giant Danone SA (ADR) (OTCMKTS:DANOY) (EPA:BN) has decided it wants to pursue a takeover of U.S. infant formula maker Mead Johnson Nutrition CO (NYSE:MJN). According to one of Reuters’ sources, “Danone has done its internal strategic review and decided that Mead Johnson is its preferred acquisition,” speaking anonymously because the matter is private.
The sources would not divulge whether Danone had made any approach to Mead Johnson or has hired any advisers for a potential transaction.
Both Danone and Mead Johnson Nutrition CO (NYSE:MJN) declined to comment for this article.
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Problems at Danone
Analysts point out that Paris-based Danone has been struggling with declining earnings for several quarters, and some investors are questioning if the company can grow in its current form trying to compete with much-larger rivals Nestle SA (ETR:NESR) and Unilever plc (ADR) (NYSE:UL).
Danone SA (ADR) (OTCMKTS:DANOY) (EPA:BN) management has also recently been taking the initiative in trying to reduce the firm’s dependence on slow-growth Europe, and has signed several deals in emerging markets such as China, Africa and elsewhere over the last 18 months.
Mead Johnson Nutrition ambitious target for Danone
A number of analysts have already pointed out have that Mead Johnson, a major player in several medical nutrition segments including baby formula, with a market value of $18 billion, would be a logical move for Danone SA (ADR) (OTCMKTS:DANOY) (EPA:BN). Acquiring MJN would give Danone a big boost in terms of Latin American and Asian growth across numerous segments. It would, however, be an ambitious move for Danone, in effect tripling the size of its medical nutrition division.
Of note, Reuters reported back in February that Danone was considering selling its medical nutrition business, worth between 4 billion euros and 7 billion euros ($5-9 billion) depending on how much they sell. This divestment doesn’t seem to be in the offing, however, given today’s news.