Is Danone going sour on Yakult?

Whilst no official comment has yet been made, yesterday saw media speculation that Groupe Danone, the French dairy and nutritional products company, was considering selling its 20 per cent stake in Yakult Honsha, the Japanese probiotic dairy products manufacturer.

Danone increased its holding in Yakult from five per cent up to 20 per cent in April 2003, and the relationship seems to have been at times over the last 11 years a little turbulent. After the initial acquisition Danone and Yakult reached an agreement to work more closely together with the objective of strengthening both companies’ position in the global probiotic market.  At the time it was also made clear that Danone would not increase their shareholding in Yakult for a five year period from 2003, and would not be able to take a controlling position in Yakult for at least another five years after that. Even prior to that 10 year grace period expiring, in April 2012 there was speculation that Danone would acquire another 15 per cent, which ultimately Danone officially denied in January 2013. Later in 2013 the two companies scrapped their formal alliance in relation to continued development of the probiotic market and began working on a much more informal co-operation, and now we have the speculation that Danone wishes to sell its stake completely.

Media speculation cites ongoing issues with “cultural differences”, but as expected the stories have impacted on Yakult’s share price.

Based upon the closing share price of Yakult the day before the stories broke, the 20 per cent stake could potentially generate proceeds of over USD 2bn for Danone, although Reuters report that Yakult’s share price has subsequently dropped by seven per cent this morning, which could help spark significant private equity interest.