Frucor has asked its shareholders to reject a takeover bid from Danone. Danone, the dairy and biscuits giant that also happens to be the world's biggest water bottler, could be rebuffed in its attempts to buy New Zealand's Frucor. One factor behind this coolness towards the bid is the low level of the offer. However, Frucor may also be keener to join forces with a company whose strengths are closer to its own development goals.

Talk of a Danone takeover for New Zealand's second biggest drinks company, Frucor, began once principal shareholder Bain Pacific decided to offload its holding. Danone is now looking to acquire at least 90% of Frucor.

Frucor has been propelled into the limelight in recent years by virtue of the success of its guarana and vitamin energy drink, V. It has gone down extremely well in Australasia, gaining over 60% of the energy drink market in New Zealand within two years and now holding close to 50% in Australia.

While Frucor has attempted to bring V to South Africa and the UK, it has found establishing the brand in the highly competitive UK market difficult, and has been looking for a strategic partner to foster development and aid distribution of the brand in the UK. Frucor currently sees the UK market as its golden hope for the future.

Other products in the Frucor portfolio include fruit juice, with the Just Juice and Fresh-Up brands, and a range of bottled water products, including Mizone Sports Water. Products such as this - and of course, V, have given Frucor something of a reputation for innovation.

At NZ$2.35, valuing Frucor at NZ$294m (US$123.5m), the Danone bid itself was regarded by many as being somewhat on the low side. This has proved to be the case, as Frucor's share price has since risen above the offer price. As a result, speculation is rife that new bidders are about to join the fray. Credit Suisse First Boston is thought to have been asked to solicit counter bids from the beverage sector. Coca Cola, PepsiCo and Cadbury Schweppes have all been linked with the company.

Frucor's reputation throughout the Asia Pacific region as an innovator, and the annual revenue growth of around 40% for the past three years make it an attractive option for any potential buyer. It is highly likely, therefore, that other bids will accompany the Danone bid in the near future.

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