updated 7/25/2005 1:43:09 PM ET 2005-07-25T17:43:09

PepsiCo Inc. has told French authorities that it isn’t preparing a bid for Groupe Danone, the Paris market regulator said Monday, curbing rumors that had sent the French food company’s shares soaring.

Danone’s shares, which had risen about 27 percent since speculation about the acquisition started in early July, plummeted after the announcement.

Charlotte Judet, a spokeswoman for the Autorite des Marches Financiers, said PepsiCo had recently told the agency it was not preparing a takeover bid for Danone, the world’s sixth-largest food group by revenue and the maker of Dannon yogurts and Evian water.

Danone said it had “taken note” of the PepsiCo decision, welcoming an end to market speculation over the last two weeks that was “fueled by the absence of a denial.”

PepsiCo did not immediately return a call for comment Monday.

Judet added that a French association representing minority shareholders filed a complaint alleging share-price manipulation of Danone’s stock. The market regulator has already been probing what happened, independent of the request, she said.

With rumors swirling, the French government repeatedly signaled hostility to a foreign takeover. Prime Minister Dominique de Villepin said Danone was “one of the jewels of our industry” and vowed to defend France’s interests.

During a visit to Madagascar, President Jacques Chirac said the government was “particularly vigilant and mobilized” to defend Danone if necessary.

Last week, Danone’s chief executive, Franck Riboud, said he was taking the speculation seriously but said PepsiCo had not approached the company.

PepsiCo has repeatedly declined to comment on any possible interest in Danone. Some analysts suggested that the Purchase, N.Y.-based maker of Pepsi-Cola, Fritos chips and Tropicana juices may have wanted to see how the public and market would react.

Given the reaction, PepsiCo likely learned that a hostile bid for Danone would not work, said Fideuram Wargny analyst Cedric Louboutin.

“The management must absolutely approve of (any takeover),” with support from the government and the public, he said.

Finance Minister Thierry Breton told Le Monde newspaper that French businesses should learn from what happened to Danone.

“Takeover projects happen all the time,” he said. “It’s, above all, the responsibility of company directors to avoid them if they’re not in the interest of employees and shareholders.”

On Thursday, Groupe Danone SA said first-half profit dropped 37 percent, weighed down by a 200 million euro charge. Danone said it is expecting full-year revenue to grow between 6 percent and 7 percent on a like-for-like basis, which strips out acquisitions, divestments and currency effects. In the first half, revenue rose 6.5 percent on the same basis.

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