COMMENT: PepsiCo/Danone's storm in a yoghurt pot
Rumours of a bid by PepsiCo for Danone sent the French dairy firm's shares soaring this week, but led to an outcry among French politicians worried about the loss of a 'national champion.' It now appears no offer is forthcoming, suggesting these fears were exaggerated this time round.
However, the row will likely deter foreign suitors from bidding for Danone in future.
Since the first rumours of a possible takeover bid by PepsiCo for Danone emerged from unspecified sources almost three weeks ago, Danone's shares have increased in value by nearly 30%.
Aside from boosting the value of Danone's stock, the prospect of a takeover has caused consternation among the French public, media and political class. Danone is something of an icon for French consumers, with its range of yoghurts, drinks and snacks enjoying popularity on both a domestic and global scale.
For this reason, politicians at the highest level pledged to defend Danone from falling into foreign hands. Recent political tensions between France and the US have seemingly fanned the flames of the fire - even the embattled President Jacques Chirac seized the opportunity to defend what many have perceived as France's national interest.
Though no bid has emerged, this is not to say that there was categorically no substance to the speculation: analysts rightly saw a strategic fit between the two companies. Danone's mineral water business, including the very successful Evian brand, would have been a particularly valuable addition to PepsiCo's portfolio, while Danone's snack range - known for its healthy products - may have complemented PepsiCo's more indulgent offerings well.
The high profile reaction of pundits and politicians alike should not detract from how important certain brands can be to consumers and their sense of national identity. It would seem unthinkable to many French shoppers that the classic 'Petit Suisse' dessert could ever be manufactured by an American company, or that Evian could come from the same company as Pepsi.
Whatever its initial intentions, it seems clear that PepsiCo will think long and hard before ever mounting an overt offer for Danone. In cases of iconic brands such as these, foreign investors - and local politicians - meddle at their own peril.
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