Danone’s patchy track record means that an activist could be useful simply by holding management to account. Chief Executive Emmanuel Faber is already aiming for an operating margin above 16 percent by 2020 through synergies from its acquisition of dairy alternative company WhiteWave and plans to take 1 billion euros of costs from the business.
Low investor confidence is the harder fix. A series of missteps such as underestimating competitors in the U.S. yogurt market have undermined trust in management. A sum-of-the-parts valuation by Exane analysts puts the share price a fifth higher than current levels. And while Trian Partners, the investment company of Nelson Peltz, persuaded Danone to announce 200 million euros of cost cuts from its European operations in 2012, he cashed out in the low 60s rather than the 78 euro target he originally thought achievable. Margins are now lower than at the outset of his campaign.
There’s a problem, of course: this is France. The threat of government intervention saw off a potential approach from Pepsi more than a decade ago, effectively branding Danone as unassailable, at least to a takeover bid. Still, new President Emmanuel Macron’s pro-business stance may signal a change. After all, what better way to show French companies are listening to good ideas – even when they come uninvited
____________________________________________________________
Request a free trial of Breakingviews here.
