Shares of WhiteWave Foods Co (NYSE:WWAV) climbed by as much as 18.62% to $56.25 after Danone said it will pay $10.1 billion for the company. The per-share valuation of the deal is $56.25, and it marks the French dairy company’s biggest acquisition in 10 years. The price represents a 24% premium over the company’s 30-day average closing price.
Danone shares also climbed on Thursday, rising 1.88% to €64.50
Full deal valued at $12.5 billion
Including debt and other liabilities WhiteWave currently has, the deal is valued at $12.5 billion. Both companies expect it to close by the end of the year, pending the necessary approvals from shareholders and regulators. Danone plans to finance the entire deal with debt and said it has received commitments from banks to secure the debt needed to complete the transaction. The French company believes it will keep the “strong” investment-grade credit rating it currently enjoys.
WhiteWave and Danone expect to see $300 million in synergies by 2020, and Danone expects the merger to be accretive to earnings within a year of the closing of the transaction.
WhiteWave and Danone to create massive dairy company
According to The Wall Street Journal, acquiring WhiteWave will give Danone some of the organic food market, which is growing rapidly, and will more than double its sales in North America. Currently Danone’s North American business is 12% of its product portfolio, but after the merger, the segment will grow to 22% of it. The combination will also make Danone one of the biggest 15 food and beverage producers in the U.S., reports Forbes.
It will also give Danone popular brands such as Horizon Organic milk, Earthbound Farm packaged salad and Wallaby Organic yogurt. WhiteWave Foods also owns the Silk almond and soy milk brand. Last year the company had about $4 billion in revenue. It’s a combination that makes sense as Danone is also known for some popular dairy brands such as Activia, Oikos and Dannon yogurt, notes Forbes.
Not everyone happy about the deal
The media outlet reports that WhiteWave Foods shareholder Ampera Capital responded to the news with rage, sending an angry letter to the company’s board of directors this morning. In the letter, the firm called the offer “grotesquely inadequate.” It also said it is “deeply disturbed” that the board accepted the offer and demands that WhiteWave Foods go back to Danone and demand more money. Ampera Capital believes fair value for the company is $69 to $84 per share.
RBC Capital Markets analyst James Edward Jones was also skeptical about the offer. He expressed concern that growth at WhiteWave Foods could be slowing, pointing out that the forward revenue growth projection for this year is 11%, compared to the 19% compound annual growth rate it enjoyed between 2012 and 2015. He added that the growth projections for 2017 and 2018 are even slower at 8% for each year.