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Diving overview:
- Dairy giant Danone has made an offer to buy the remaining shares of kefir product maker Lifeway Foods that it does not already own for about $307 million, or per share, according to a filing with regulators. Increased to $27. Danone originally offered to pay about $283 million, or $25 per share, in September. Danone currently owns 23.3% of Lifeway’s common stock.
- In a letter to LifeWay CEO Julie Smolyansky, Danone said it was “disappointed” with the board’s initial response to the previous proposal. It noted that the price increase “fully reflects the fundamental potential of the company.”
- LifeWay has been a key beneficiary of growing consumer demand for healthier products through its kefir, a yogurt-like dairy beverage, and fermented probiotic products. This week, Lifeway reported net sales of $46.1 million for the quarter ended Sept. 30, up $5.2 million from the same period last year. This marks the company’s 20th consecutive quarter of year-over-year growth.
Dive Insights:
As Danone seeks to expand its Better Dairy portfolio and bring additional growth to its portfolio, the addition of Lifeway will certainly help achieve both of these goals. However, as is common in M&A, Lifeway rejected Danone’s initial offer and then demanded a higher price.
The new price increases by $2 per share, but it is not yet known whether this will be enough to satisfy Lifeway. “We will carefully review and evaluate the revised proposal to determine what actions we believe are in the best interest of the company, its shareholders and other stakeholders,” LifeWay said in a statement late Friday afternoon.
Danone has been a Lifeway shareholder for over 20 years and knows the company better than anyone. The fact that Lifeway owns nearly a quarter of the company makes it unlikely that Lifeway will receive another offer from a buyer other than Danone.
“We continue to believe lifeway Combining with Danone presents an attractive opportunity to unleash our full potential by removing the constraints and additional resources required of a public company. Lifeway’s size,” Danone said in the letter. “We welcome the opportunity to discuss this updated proposal and next steps with you.”
The proposed acquisition comes as Lifeway is embroiled in a bitter family dispute between the CEO and her relatives. Julie Smolyansky’s brother and mother, Edward and Ludmila Smolyansky, said in a letter earlier this month that they “strongly supported” Danone’s initial proposal and urged the board to “use this opportunity to deliver lasting value to shareholders, employees and consumers.” He said he did.
“We encourage Lifeway’s board of directors to carefully and in good faith reconsider Danone’s proposal,” Edward and Ludmila said. “The longer they wait, the more money they’re leaving on the table, to the detriment of everyone.”
Last year, Kanen Wealth Management said Lifeway’s stock was undervalued and its price could not be fully realized with its board and CEO in place. The company asked Lifeway to explore a sale. According to the company, LifeWay’s stock price has risen 225% since then.
Update: The story has been updated with comments from Lifeway on Danone’s new offering.
