Danone (DANOY) will sell its Stonyfield organic yogurt brand as part of a deal to win U.S. regulator support and clear the last major regulatory hurdle to its $12.5 billion acquisition of WhiteWave Foods (WWAV) .
Paris-based Danone said, Friday, it had struck an "agreement in principle, in order to facilitate the prompt closing of the WhiteWave acquisition." The sale of of Stonyfield will be completed after the WhiteWave deal closes.
WhiteWave shares were up 0.93% on Friday at $56.16. Danone shares traded Friday at €63.76, up 0.33%.
Stonyfield posted sales of $370 million in 2016. The bulk of those sales are in the U.S. where the brand has about 65% of the organic yogurt market, according to a recent estimate cited by by non-profit organic industry watchdog the Cornucopia Institute. That market share dwarfs WhiteWave various organic brands, including Wallaby and SoDelicious, which together have about 7% of the market.
Cornucopia last year wrote to the DOJ warning that the combination of WhiteWave's brands with Stonyfield would be "anti-competitive and a threat to the U.S. organic dairy market."
Danone insisted that selling Stonyfield won't reduced the benefits of its deal for WhiteWave, and reconfirmed expectations that the acquisition will boost EBIT by $300 million by 2020 and boost like-for-like sales growth by 0.5% to 1%.
"This is a good outcome as it addresses the DOJ's concerns and enables Danone to shortly begin to capture the benefits of the combination and the value creation announced last July," Danone CEO Emmanuel Faber said in a statement.
Londonderry, N.H.-based Stonyfield was acquired by Danone in a two-part deal, over 2001 and 2004, that resulted in the French group holding a controlling 80% stake. Founded in 1983 with seven cows and one yogurt recipe, the company was originally the project of a family-run organic farming school. Its launch coincided with a boom in demand for organic products, driving sales growth of as much as 20% a year during the 1990s, though that growth has slowed in recent years as the organic market matured.
Danone will pay $56.25 in cash for each WhiteWave share, valuing the target's equity at about $9.84 billion. The French company will also assume WhiteWave debt.