By Ruth Bender
PARIS-- Danone SA said it is keeping its medical-nutrition
business, after months of talks with potential buyers that gave
rise to speculation that the French yogurt maker could be embarking
on a bigger deal in its quest to revive growth.
The owner of Activia yogurt and Aptamil baby formula on Friday
said each of its four units play a crucial role, as the company
tries to bounce back from a series of problems that have hampered
sales and profit growth in some key markets.
"...Each of our core businesses--fresh dairy products, waters,
early life nutrition and medical nutrition--has a role to play in
living up to our mission and achieving the profitable, sustainable
growth that is an integral part of our strategy," Chief Executive
Emmanuel Faber said in a statement.
Danone's pulling of the sale comes after months of speculation
over its mergers-and-acquisitions strategy. In recent months,
Danone has held talks with several interested potential buyers of
its medical-nutrition business, including German health-care group
Fresenius SE & Co., which teamed up with buyout firm Permira,
according to people familiar with the matter.
"We are keeping this business," said Laurent Sacchi, adviser to
the group's chairman and secretary of the board, which met Thursday
to discuss the group's current situation. "Danone decided it can
get the best out of the business."
The company, known also for Evian water, has been considering
options to ensure its long-term growth, including whether it should
pursue any larger deals or tie-ups, people familiar with the matter
have said. Analysts speculated that Danone could use the proceeds
from a sale of the medical-nutrition business to try to buy a
larger company such as U.S. baby-food company Mead Johnson
Nutrition Co., but Danone recently said it hadn't discussed or
decided on such a move.
The decision to keep the medical business--which has generated
steady sales and profit growth in recent years--lowers the risk of
Danone going after a big target in the near term, analysts said.
"The cash received could have been put to good use elsewhere," said
Alex Howson from Jefferies. "On the other hand, it is a business
that grows the topline nicely with high margins, and hence it is
not a labor to keep it."
Signaling that it has ambitions elsewhere, Danone said it has
created a new Africa unit and named current Chief Financial Officer
Pierre- André Térisse to head it. Danone said it wants to
accelerate its expansion in Africa, a region that generates around
EUR1.2 billion ($1.5 billion) in annual sales, or around 6% of its
total sales.
Danone has been trying to bounce back from a series of problems,
starting with the effects of the economic crisis in Europe,
followed by a food-safety warning in Asia, milk-price inflation and
geopolitical tension between Russia and Ukraine.
Sales growth started rebounding again in the third quarter
following efforts to regain market share in China, where sales fell
dramatically after Danone had to pull thousands of products due to
a safety warning from a large supplier that later turned out to be
a false alarm.
But Danone won't be finishing the year on a high note.
The company said it now targets organic revenue growth of "over
4.5%" in 2015. That compares with a previous goal for sales to rise
between 4.5% and 5.5%. Its operating margin will likely fall less
than 0.2 percentage point, the lower end of its target range,
Danone said.
Mr. Faber, formerly Danone's deputy CEO, replaced longtime CEO
Franck Riboud on Oct. 1. In a new sign that the company is off to a
fresh start following the change, Danone promoted company insider
Cécile Cabanis to replace Mr. Térisse as CFO starting in February
and named Gustavo Valle, who has headed the group's European
business, as head of its largest unit, fresh dairy.
Write to Ruth Bender at Ruth.Bender@wsj.com
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