Kraft to acquire Danone's global biscuit business
July 03, 2007
by FoodBusinessNews.net Staff
NORTHFIELD, ILL. — Kraft Foods Inc. has made an offer to acquire the global biscuit business of Groupe Danone for €5.3 billion ($7.2 billion) in cash.
"This proposed acquisition makes great sense for Kraft," said Irene Rosenfeld, chairman and chief executive officer. "It will increase our presence in snacks — our fastest growing global segment — and transform our international business. This growing, high-margin business will give Kraft another core growth category in Europe, a cornerstone for faster growth in emerging markets, and the best portfolio of iconic biscuit brands in the world."
French law requires Danone to consult with its Works Council before entering into a definitive agreement, but both companies expect the transaction to close before the end of the year.
The acquisition would include Danone’s biscuit brands, which include LU, Tuc and Prince, as well as operations and assets in 20 countries, including 36 manufacturing facilities. However, the proposed acquisition does not include Danone’s joint ventures in Latin America and India.
In 2006, the businesses to be acquired had €2 billion ($2.7 billion) in revenue, and the European headquarters of the biscuit business will stay in the Paris area for the foreseeable. Kraft is not planning to close any of Danone’s biscuit manufacturing facilities in France for at least three years after the agreement is signed.
"This transaction will create long-term value for our shareholders, and we expect it to be accretive to earnings per share in the first year," Ms. Rosenfeld said. "Our strong balance sheet enables us to finance this acquisition with debt, while preserving our ability to execute our long-term growth plan, including our previously announced share repurchase program."
Georges Casala, who is currently running Danone’s biscuit business, will join Kraft along with key members of his team once the transaction closes. Sanjay Khosla, president of Kraft International, will manage the entire E.U. biscuit business.
The acquisition will expand Kraft’s presence around the world, allowing the company to double the size of its business in China and enter the biscuit category in Eastern Europe and establish itself in Malaysia and Indonesia.