Acceptances on the way for Danone

By Phil Boeyen, ShareChat Business News Editor

Thursday 10th January 2002

Acceptances have begun trickling in for Danone's Frucor (NZSE: FRU) bid with the French company issuing a notice to the market on Thursday that shareholders have agreed to sell just over 39% of the stock.

Although by far the majority of that amount - 37.6% - represents shares held by Australian investor Bain Pacific & Associates, the extra 1.5% shows the tide may be beginning to turn in Danone's favour.

The global food and drink giant has worked hard since October to convince the market that its $2.35 bid is fully priced, but Frucor's independent directors remained adamant it undervalued the company.

However that view changed earlier this week when an updated appraisal report dropped the lower range of Frucor's value by 15 cents to $2.38 and the independent directors advised Frucor shareholders they should now accept the offer.

Danone's executive vice-president for Asia-Pacific, Simon Israel, says he expects the acceptances to gain momentum next week as the offer period reaches its closing date of January 18.

Mr Israel says Danone has been contacted by a number of major Frucor shareholders recently, some of whom hold up to 5% of the stock and have been long-term investors and are indicating they will be taking up the company's offer.

The question now is whether Danone will receive 90% of acceptances and be able to take the rest of the stock compulsorily, or if it will settle for a majority stake of more than 50%.

Mr Israel won't be drawn on whether Danone would be settle for a majority stake but admits to being concerned at the possible difficulties it would face in trying to expand Frucor when it would be a related party to some of the decisions at board level.

Danone has said from the start that it has been attracted to Frucor by its innovation, and Mr Israel says that energy drink V is what first attracted them to the company, although it is also interested in the flavoured water product, Mizone.

Danone is the world's leading producer of bottled water and owns a number of best-selling brands including Evian and Volvic. It is also the largest beverage company in China and Indonesia and it is in those markets that it sees some of the best potential for the Frucor products.

If the company was successful in its Frucor bid, Mr Israel says Danone will be taking a long-term view of the business and that the company's risk profile will change.

Danone has extended its offer for Frucor three times since its initial bid. The New Zealand beverage company's price has been up as high as $2.50 since the Danone bid was first issued but has been trading at below $2.35 since mid-December.

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