Blog: Chris Brook-CarterIs Danone really Pepsi's French fancy?

Chris Brook-Carter | 22 July 2005

If all the speculation proves right, how well will yoghurt and French water wash down Pepsi’s current diet of soft drinks and savoury snacks? The bullish answer is very well indeed.

Danone has a powerful portfolio of brands including its attractive global water business and world-beating yoghurt products. If it can get this acquisition right, from takeover to integration, then it will significantly boost PepsiCo’s non-carbonated and international businesses - areas that are already proving strong performers for the group.

All that said, if reports of a board meeting at PepsiCo HQ today are true, then CEO Steve Reinemund and Co could decide in the next 24 hours that discretion is the better part of valour and walk away from a potential disaster.

From the moment a bid is announced, Danone has the potential to be a metaphorical minefield for PepsiCo. Not only is it likely to prove expensive, some analysts are estimating around US$36bn, but reaction in France to rumours of the impending bid should act as a stark warning.

Rhetoric from some of France’s leading politicians suggest Pepsi will be battling far more than Danone’s board if it launches a hostile bid, which could lead to a drawn out and expensive battle.

Even if the US group beats off the French political vested interests, it may find French consumers and Danone’s unions and management harder to subdue. And, following the potentially bloody takeover battle, as the new owner, Pepsi could ill-afford to loose the support of either group.


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