Groupe Danone SA, the maker of Dannon yogurt and Evian waters, is strengthening its baby food business with a bid Monday to buy Royal Numico NV for $16.8 billion.
The addition of Numico would make Danone one of the world’s largest players in the fast-growing $24 billion baby food industry, which experts expect to grow 25 percent by 2010.
“With this project, we are designing a new Groupe Danone, enhancing dramatically its growth profile and its growth potential for years to come,” Danone CEO Franck Riboud said in a statement.
Groupe Danone, is offering 55 euros ($75) per share, which is a 44 percent premium over the average share price over the last three months, according to a joint statement by the two companies.
Netherlands-based Numico, the maker of the Olvarit, Bambix and Nutrilon baby food brands and clinical nutrition products, said its board would recommend that shareholders accept Danone’s offer.
In 2005, Numico was the world’s third-largest seller of baby food, controlling a nearly 10 percent stake in the world market, according to data from Euromonitor International. That year, Danone ranked 8th.
Danone makes baby food under the Danette brand name. Danone and Numico expect “agreement can be reached” and will hold a joint news conference Tuesday afternoon.
Numico said Monday it will seek to withdraw its shares from trading “as soon as possible,” providing Danone’s offer is declared unconditional. Shareholders will be able to vote on the deal in an extraordinary meeting mid-September when the terms and conditions will be published. A settlement date is expected in early October.
Numico has seen particularly strong growth in Eastern Europe and Asia. The company posted a net profit of 202 million euros ($265 million) in 2006, while sales rose 32 percent to 2.64 billion euros ($3.47 billion).
Numico CEO Jan Bennink said the offer was “a very attractive proposition for all of our stakeholders.” The bid, which Numico’s board will recommend to shareholders, is not expected to lead to job losses, both companies said.
Bennink said during a conference call that he plans to step down after the deal is completed.
“Numico holders can get a very nice price for their shares, which are already expensive,” SNS Securities analyst Richard Withagen told Dow Jones Newswires. He added that he can’t think of any party that would top the offer.
Danone’s move follows rival Nestle’s $5.5 billion bid for Gerber Products Co., which will give Nestle the largest share of the global baby food market. It also helps further Nestle’s recent focus on health and nutrition, following its purchases of the U.S. weight control company Jenny Craig and Novartis Medical Nutrition.
Danone’s bid for Numico comes less than a week after the company received a $7.2 billion offer for its cookie and cereal division from Kraft Foods Inc.
Riboud said shedding the cookie division would provide funds for acquisitions and allow it to concentrate on its dairy and water business. The bid is being considered on an exclusive basis by Danone’s board.
Goldman Sachs International, Citigroup and Allen & Overy LLP are advising Numico, while Lazard, BNP Paribas and De Brauw Blackstone Westbroek NV are advising Danone.
Danone shares fell 3.3 percent Monday to close at 59.43 euros ($80.95). Numico shares were suspended from trading by the Dutch regulator at midday after rising 11.38 percent to 44.50 euros ($60.61).