WWAV Whitewave Foods Company (The) (delisted)

By Kelsey Gee 

WhiteWave Foods Co. shareholders this week are expected to support a $10.4 billion takeover bid by French dairy giant Danone SA, despite concerns among some investors and organic industry groups about the deal.

A majority of WhiteWave common stockholders need to vote in favor of the deal at a meeting Tuesday at its Denver headquarters in order to join the makers of the leading brands of U.S. organic milk, yogurt, and plant-based dairy substitutes like Silk soymilk.

Proxy advisory firms Glass Lewis & Co. and Institutional Shareholder Services issued reports last month recommending shareholders approve the tie-up, which was announced July 7.

Some analysts have called Danone a natural home for WhiteWave, given the French company's international presence in the grocery-store dairy aisle, with brands like Actimel and Activia, which could give products like Horizon Organic milk a bigger platform outside the U.S. Danone, in turn, said it is eager to take over one of the fastest-growing companies in the healthy and organic food sector that is transforming U.S. eating habits.

However, after investors initially sent WhiteWave shares soaring nearly 19% the day the deal was announced, enthusiasm on Wall Street has since fizzled.

Shares closed Friday at $54.43 each or 3% lower than the offer price of $56.25 a share.

Some investors say they are disappointed WhiteWave wasn't offered more money for the company, which has posted double-digit sales growth with many of its top-selling organic and plant-based products.

Nick Mazing, founder of New York's Ampera Capital LLC and a WhiteWave shareholder, said that the premium Danone paid is "objectively below that of comparable deals" for natural and organic brands by larger food companies. In his view, shares could have fetched as much as 30% to 40% over its pre-offer value.

WhiteWave disclosed in an Aug. 30 regulatory filing that the company agreed to Danone's request to negotiate exclusively.

Both WhiteWave and Danone said in regulatory filings that they expect the deal will close by the end of the year. A WhiteWave spokeswoman and a representative for Danone both declined to comment ahead of the vote.

"In our view, the WhiteWave board conducted a limited, though still adequate, review of strategic and transaction alternatives," Glass Lewis said in its report of the merger, adding that the advisory firm generally believes shareholders' interests are better served when a company considers multiple proposals.

The size of WhiteWave, which reported a net profit of $168 million on revenue of $3.9 billion in 2015, and the nature of the industry might have mitigated the need for a wider solicitation process, Glass Lewis said.

WhiteWave also disclosed in September that it likely will be asked to provide more information to the Justice Department, as the agency conducts an antitrust review for what would be the largest U.S. organic dairy company if the deal is completed.

Both WhiteWave, in its Horizon Organic and Wallaby dairy lines, and Danone, with a major stake in Stonyfield yogurt, purchase a large supply of organic milk.

The Cornucopia Institute, a Wisconsin-based organic watchdog, in August asked the Justice Department to investigate the acquisition for any impact on pricing for consumers or producers, due to the large combined market share of the two companies.

Mark Kastel, an organic dairy farmer and head of Corncupia Institute, said he doesn't support the deal. "Organics have become big business, and morphed from a farmer-centric industry to one that looks a lot like the multinational corporations we were trying to move away from," said Mr. Kastel. "For small, organic dairy farmers up against these larger, lower-cost operators, it's not a fair competition."

Write to Kelsey Gee at kelsey.gee@wsj.com

(END) Dow Jones Newswires

October 02, 2016 16:31 ET (20:31 GMT)

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