Danone hopes to sell water assets

According to Japanese media, French group Danone has approached Japan’s Suntory Holdings about a potential purchase of the French food giant’s mineral water business, which includes the Evian and Volvic brands, it was reported on 22 October 2011.

Suntory is believed to be keen on the idea and is likely to start negotiating with Danone this month after examining the details of the proposal.

Privately-owned Suntory is trying to expand overseas, mainly in Asia, and appears favourably disposed to deal with Danone. Still, it could be difficult for the two firms to reach an agreement due to the size of the potential transaction, Japanese sources say.

Danone hopes to sell its entire mineral water business, but according to insiders it could consider a deal to sell only its Asian operations because its global water business may be too expensive to sell all at once.

In 2010, Danone’s water business had sales of EUR 2.86 billion (USD 4.0 billion), out of total group sales of EUR 17 billion (USD 23.9 billion). Danone reported that its water business had an EBIT of EUR 371 million (or 15 percent of total profits), which makes Danone’s asking price of USD 5 billion to USD 7 billion (EUR 3.6 billion – 5 billion) for its entire water assets a steep one.

Suntory in 2009 bought Europe’s privately held Orangina Schweppes Group for about USD 3.3 billion, in what was the year’s largest purchase by a Japanese company of a foreign firm.

Danone is likely to use the proceeds of a sale for the acquisition of Pfizer’s infant nutrition business, it was reported.