US activist investor Corvex 'buys stake in Danone' - Just Food
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US activist investor Corvex ‘buys stake in Danone’

15 Aug 2017

US-based fund Corvex Management has reportedly emerged as a shareholder in Danone, with the activist investor said to believe the Activia and Alpro maker is undervalued.

Citing unnamed sources, Bloomberg yesterday (14 August) reported Corvex owns shares in the French food giant worth around US$400m.

Corvex, run by Keith Meister, contends Danone’s shares will rise if there is an improvement in its operational performance and management is successful in positioning the company to tap into health and wellness, Bloomberg reported. Corvex has no plans at present to publicly push for management changes, it added.

Officials at Danone declined to comment when contacted by just-food this morning.

Shares in Danone were up 2.57% at EUR68.13 at 09:34 CET. Including this morning’s rise, Danone’s shares have fallen in value by 2.4% over the last 12 months.

In 2016, Danone saw its sales fall more than 2% amid declining revenues from its fresh dairy business and muted growth from its early life nutrition division. Profits, however, were higher year-on-year.

In April, Danone sealed its acquisition, announced last summer, of US-based dairy and plant-based dairy alternatives business WhiteWave Foods.

In the first half of 2017, Danone saw its sales climb more than 9%, helped by the contribution from the WhiteWave assets. Operating income grew 5.8% and net income was up 11%. On a like-for-like basis, sales inched up 0.4%.

CEO Emmanuel Faber has described 2017 as “a pivotal year for the execution of our transformation agenda”. He said: “H1 2017 has been a period of intense construction for Danone, with the creation of the processes of decoupling of our growth and efficiency agendas, the creation of our regional grid, the launch of our EUR1bn (US$907.2m) savings Protein programme and the integration of WhiteWave in Q2.”

Andrew Wood, an equity analyst at Sanford Bernstein covering Danone, said he agreed with Corvex’s reported investment. “We also believe Danone is under-valued and we have a price target which is +26% above the current price.”

Wood said the 7% rise in Danone’s over-the-counter American Depositary Receipts in the US last night on the back of Bloomberg’s report “may seem like an excessive reaction to one investor taking a 0.8% stake in the company”. However, he added: “it is representative of a lot of interest we have seen from, and conversations we have had with, US investors – activist and non-activist – in recent months. To the extent that these investors keep up the pressure on CEO Faber to deliver on his commitment of 4-5% top-line growth and plus 300 basis points of margin growth from 2017-2020, to arrive at 16% by 2020. this is good news.”

Danone CEO Emmanuel Faber on why industry “mindset” on health and sustainability needs to change – just-food interview, June 2017, part one

How Danone’s “manifesto” is shaping its corporate activity – just-food interview with Danone CEO Emmanuel Faber, June 2017, part two