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Danone splits from Wahaha; not talking to Mead

By Jess Halliday , 30-Sep-2009

Danone’s troubled relationship with China’s Wahaha looks finally to be at an end; and rumours of a new deal with Mead Johnson over baby food are flatly denied.

The French food firm entered into a joint venture with beverage company Wahaha in 1996. However the two firms fell out a decade later when, after several rebuffed attempts to buy out the minority shareholder, Danone finally gained agreement on a deal.

However in 2007, before any such deal was closed, Danone called on Wahaha to stop selling branded products that had not been agreed between the two parties. Wahaha boss Zong Qinghou then pulled the plug on the acquisition plan, claiming it was a “hostile takeover” and that the business was undervalued at ¥4 billion.

No laughing matter

Today Danone has said it has reached an “amicable settlement”, which involves Danone selling its 51 per cent stake in the companies’ joint ventures to the Chinese partners. The settlement is still subject to approval by the Chinese authorities, but if it gets the green light it will put an end to all the legal proceedings between the companies.

Franck Riboud, CEO and chairman of Danone, said the collaboration has had its up-sides, having “helped to build a strong and respected leader in the Chinese beverage industry”.

The split from Wahaha does not indicate an end to its Chinese activities however. It has been present in that market since 1987, and plans to continue – and even accelerate – its activities.

No details were given in today’s announcement about how it plans to put this plan into action.

Quashed rumours

Danone has also moved in the last 24 hours to quash reports on the Financial Times Alphaville blog that Danone had hired Lazard, and investment bank, with a view to bidding for Mead Johnson, an infant nutrition group.

The speculation was not received well by the market: Danone’s shares fell and closed 2.1 per cent down to €40.50 yesterday.

The company has now stated: No discussions are currently taking place between Danone and Mead Johnson, nor has Danone hired any advisor or bank to advise the company on this topic.”

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