WhiteWave Foods brands - Silk, So Delicious, Earthbound Farms
WhiteWave Foods owns such brands as Silk, So Delicious and Earthbound Farm.

PARIS — The phrase “win-win” aptly describes Danone S.A.’s acquisition of The WhiteWave Foods Co., Denver. For Danone, the WhiteWave business will strengthen its position in the United States, and for WhiteWave Foods, Danone has the capability to introduce its products to the rest of the world.

On July 7, Danone entered into an agreement to acquire WhiteWave Foods for $56.25 per share in a deal valued at approximately $12.5 billion and including the assumption of WhiteWave Foods debt and other obligations. Based in Denver, WhiteWave Foods is an international competitor in the plant-based, organic dairy and organic produce categories. The company owns such brands as Silk, So Delicious, Horizon Organic, Earthbound Farm and Alpro. The company generated approximately $4 billion in sales during fiscal 2015.

For Danone, the acquisition has several benefits. It allows the company to better align its product portfolio with consumer trends for healthier and sustainable eating and drinking options. Organic foods and beverages and non-G.M.O. plant-based alternatives to milk and yogurt are among the fastest growing categories in the industry, according to the company.

Emmanuel Faber, Dannon, Danone
Emmanuel Faber, c.e.o. of Danone

“ … This is basically embracing the plant-based, health and planet promise,” said Emmanuel Faber, chief executive officer of Danone, during a July 7 conference call with analysts to discuss the acquisition. “In a nutshell, the plant-based proposition is for a healthier choice and a better choice for the planet, using less land, less water, emitting less greenhouse (gas) than dairy.

“Yet I think we are only scratching the surface because putting these two companies together, our global dairy fermentation technology know-how and the leading plant-based ferment technology of WhiteWave, we are actually going to create a situation where we are going to have the broadest diversity in fermented protein and textured products together, which is combining the incredible strengths of WhiteWave and our strengths to drive this alimentation revolution further.”

For WhiteWave Foods, the acquisition will give the company and its brands exposure to global markets beyond the United States and Europe.

Gregg Engles, WhiteWave
Gregg Engles, chairman and c.e.o. of WhiteWave

“Perhaps the most exciting to me is the globalization, particularly of our plant-based platform,” said Gregg Engles, chairman and c.e.o. of WhiteWave Foods, during the conference call. “But I think there are opportunities in other aspects of our portfolio as well.

“While it is a little bit newer to Danone, I think coffee is a global platform and a global business, and I think we play in coffee in a very interesting way.”

Mr. Engles said he sees several opportunities for Danone to take WhiteWave’s coffee creamer business in the United States and expand it to other regions of the world where the trend toward flavored coffees may be catching on.


WhiteWave Foods International Delight coffee creamers
Danone has an opportunity to expand WhiteWave's coffee creamer business beyond the U.S.

“Then in Europe, while we have a clear leading position in our plant-based categories in Europe, we really only go direct to market in four marketplaces in the E.U.,” he said. “Danone's presence in Europe outside of those four geographies, I think will allow us to have a much more robust go-to-market effort in the European marketplace. There's really fantastic logic across the board in this transaction.”

In an analyst comment published shortly after the agreement was announced, Robert Moskow, an analyst with the firm Credit Suisse, said the 24% premium Danone agreed to pay for WhiteWave a good price but not an outstanding one.

Robert Moskow, Credit Suisse
Robert Moskow, analyst with Credit Suisse

“By our math, the $12.5 billion enterprise value represents 22x our 2016 EBITDA estimate of $590 million,” he wrote. “While a 22x multiple is nothing to sneeze at, one has to take into account WhiteWave’s unique leadership in the on-trend plant-based food and beverage industry, it’s peer leading double-digit revenue growth and its clear path to margin expansion from capital investments and mix enhancement. By 2020, this company very well could have been generating $850 million in EBITDA on its own, representing a paid multiple of 15x before synergies and 11x after.”

Cecile Canais, chief financial officer of Danone, said the company is projecting $300 million in synergies at the EBIT level on an annual basis.

Cecile Canais, Danone
Cecile Canais, c.f.o. of Danone

“From these synergies, 75% are cost synergies,” she said. “And of this 75%, 85% will be in the U.S. The cost synergies will basically be the results of efficiencies created through the combination, by scaling sourcing and supply chain and fixed cost optimization. In addition there will be revenue synergies, driven by the acceleration of existing platforms, as well as the leverage of R.&D. capabilities to support innovations.”

In fiscal 2015, Danone generated €22,412 million ($24,842 million) in sales, a 6% increase compared with the prior year. By geographic region sales were €8,900 million in Europe, €4,471 million in North America and €9,041 million in Asia, Latin America, the Middle East and Africa.

For Danone, the transaction also will diversify the company’s presence in the U.S., which primarily consists of the dairy companies The Dannon Co., Stonyfield Farm and the Yocrunch Co. as well as brands in the infant formula and bottled water categories. Once the transaction is closed, Danone’s business in North America will increase from 11% of the company’s portfolio to 22%.

Danone yogurt brands - Dannon, YoCrunch, Stonyfield Farms
Danone's U.S. presence primarily consists of the dairy companies The Dannon Co., Stonyfield Farm and the Yocrunch Co

“Danone has started its evolution in the U.S. at the leading edge of new consumer aspirations and embracing a new reality, which is that organic and non-G.M.O.s are very fast growing,” Mr. Faber said “And actually today the sum of both is representing 16% of the total food s.k.u.s (stock-keeping units) available on the shelf in the U.S.”

The market research firm Packaged Facts, Rockville, Md., estimates the U.S. retail market for natural and organic foods and beverages will reach $87 billion in 2019, up from $53 billion in 2014.  Packaged Facts estimates dairy products, including milk and milk alternatives, yogurt, ice cream, eggs, and cheese, comprise 30% of natural and organic food retail sales. This is second only to fresh produce with 35% of the market. Beverages, including coffee, tea, juices and soft drinks, come in third with 15% of sales.

With the acquisition, Danone will not only control a sizable share of the U.S. market, but the company is now even more formidable when competing with other European food giants, namely Nestle and Unilever, on a global scale, according to Packaged Facts. Danone also gains entry into the planted-based foods and beverages category, which itself is a prime growth category.

David Sprinkle, Packaged Facts
David Sprinkle, research director for Packaged Facts

“The strong get stronger in what is and will continue to be a competitive mainstream segment of the food and beverage industry,” said David Sprinkle, research director, Packaged Facts. “This deal will be the largest to date in the natural and organic foods industry, and for good reason from Danone’s perspective. Today’s consumers favor fresh and healthy over processed.”

The transaction has been approved by the boards of directors of both companies and is expected to be completed by the end of the year.