French premier pledges to defend Danone from PepsiCo

PARIS - France's Prime Minister, Dominique de Villepin, shared yesterday in the frisson of horror shivering through the French establishment at the prospect of Danone, the country's largest food company, falling into the hands of PepsiCo.

As Danone shares surged for a second day, after reports that the US food and drink giant was considering a hostile bid, M. de Villepin said the water, biscuit and dairy company was "one of the jewels of French industry".

He said: "We intend, naturally, to defend the interests of France."

PepsiCo has refused to comment but is said to have commissioned two merchant banks, Morgan Stanley and UBS, to study the Danone dossier. Most commentators believe the US company would not attempt a hostile takeover.

The president-directeur general of Danone, Franck Riboud, and French politicians from the left and right, have made it clear any PepsiCo move would be treated as a form of national crisis.

M. Riboud, it was reported yesterday, alerted President Jacques Chirac to the possibility of a PepsiCo bid several days ago.

Having lost an EU referendum, largely on the electorate's fears of globalisation and market forces, and having lost the 2012 Olympic Games, M. Chirac cannot afford to "lose" Danone.

The company, which has an annual turnover of US$13.7bn is the largest volume bottled water trader in the world - Evian, Volvic, Badoit.

It also owns LU and Petit Prince biscuits and processed milk brands, from Actimel to Taillefine to Petit Gervais, a pivotal customer for French dairy farmers (buying 1 billion litres of milk a year).

Legally speaking, there is nothing the French can do to block a foreign bid - even a hostile one - for a French company which is not in the defence field. In practical terms, however, there are many ploys Paris could use.

Danone shares rose 10.19 per cent to a record 87.60 on Tuesday and climbed another 5.6 per cent to 92.50 by mid-afternoon trading yesterday.

- INDEPENDENT