The possibility of a PepsiCo bid for Danone is continuing to cause controversy in France, with the country's Prime Minister backing calls for the water and food giant to remain in French hands.

As one newspaper reported today (21 July) that the Pepsi board was due to meet tomorrow to discuss a Danone takeover, French prime minister Dominique Villepin added his name to a number of politicians who claimed Danone must stay French.

He added that the government would "defend French interests."

A Dow Jones report today cited a person close to the company who said that the feeling within Danone is that the company knows it could be taken over.

So far this week, government ministers Jean-Louis Borloo and Jean-Francois Cope and former finance ministers Laurent Fabius and Dominique Strauss-Kahn have called for government intervention should a bid emerge.

Danone CEO Franck Riboud has already stated his intention to "fight for Danone's independence."

So far the analyst community seems split on whether PepsiCo will bid for Danone. Sanford Bernstein analyst Andrew Wood, in the press today, gave the possibility of a bid only a 25% to 30% chance.

However, in the same Dow Jones report, Cheuvreux analyst Francois Digard said that a Pepsi bid on Danone is still possible, and that it could offer up to €125 per share.