Blog: Dean BestKraft basks in biscuit bid

Dean Best | 4 July 2007

It’s Independence Day today (4 July) in the US – and, for certain top executives at Kraft Foods, it must feel like a well-deserved break after recent hard work.

Yesterday, the company announced it had tabled a bid to buy Groupe Danone’s biscuits and cereals business and Kraft CEO Irene Rosenfeld was in Paris, alongside her French counterpart Franck Riboud, to outline the offer.

Discussions on the offer between the two companies are yet to be finalised but yesterday’s hastily arranged press conference suggests the deal has been agreed in principle. A number of other potential obstacles also remain before Kraft and Danone can toast a deal – Danone must meet union representatives to persuade its workers of the merits of the offer, while the EU competition authorities may study the impact of the EUR5.3bn (US$7.2bn) deal.

Nevertheless, Kraft’ believes its bid to snap up Danone’s biscuits and cereals represents potentially good business for the US food giant. Kraft’s processed foods have lost favour with health-conscious consumers in the West. However, the company hopes that, by buying Danone’s biscuit business, it will have a larger presence in a still robust snack category and access to emerging markets, including China and Russia.

The deal looks to be decent business for Danone too. The French group’s biscuits division has failed to keep pace with the growth from its beverages and dairy operations. It is likely Danone will look to plough some of the sale proceeds back into those businesses and boost growth still further. Danone could be well-placed to make acquisitions of its own with Dutch nutrition group Royal Numico earmarked as a potential target by industry analysts. It will be intriguing to see which way that particular cookie crumbles.


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