About the deal
Danone (DANOY) will be acquiring WhiteWave Foods (WWAV) for $56.25 per share in an all-cash transaction. This makes WWAV’s total enterprise value ~$12.5 billion, including debt and other WhiteWave liabilities.
This deal is projected to close by the end of 2016, subject to the regulatory approvals of WhiteWave’s shareholders and other customary conditions. This deal has been unanimously approved by both Danone’s and WhiteWave’s boards of directors.
Rationale for the acquisition
Danone expects this acquisition to help double the size of its US business and accelerate its 2020 plan for an Alimentation revolution and the acquisition of high sustainable and profitable growth. Danone’s management feels that acquiring WhiteWave will enhance its growth profile and expand its footprint in North America. Danone’s management also believes that WhiteWave will be a perfect alliance for creating significant value for all of its stakeholders.
WhiteWave, on the other hand, will have the chance to continue its industry-leading growth as part of a larger global company. It can make use of Danone’s substantial financial, geographic, and operational resources. WhiteWave products include organic foods and beverages and non-GMO (genetically modified organisms), plant-based alternatives to milk and yogurt. These products are the fastest growing categories in the industry currently. After the deal’s close, Danone will hold a widespread portfolio of brands and products in organic foods and beverages, fresh dairy, and plant-based alternatives to milk and yogurt.
Danone also expects to take the sustainability equation of dairy and plant-based products to the next level through its dairy fermentation technology and WhiteWave’s plant-based fermentation technology.
How Danone expects to create value from the deal
Danone plans to gain run-rate EBIT (earnings before interest and tax) synergies of $300 million by 2020. This represents 8% of WhiteWave’s 2015 sales and 80% of WhiteWave’s 2015 operating profit. Danone also projects good EPS (earning per share) accretion in the first year after the deal closes along with profitable growth in stable geographies.
WhiteWave’s peers in the industry include Hain Celestial (HAIN) and Kraft Heinz (KHC), who are expected to report earnings growth of 8% and 17%, respectively, in their upcoming quarters. WhiteWave forms 0.45% of the Vanguard Consumer Staples ETF (VDC).