Dive Brief:
- Dairy giant Danone increased its offer to buy the remaining stock it doesn’t already own in kefir products maker Lifeway Foods to about $307 million, or $27 a share, according to a regulatory filing. Danone initially offered to pay roughly $283 million, or $25 a share in September. Danone currently owns 23.3% of Lifeway’s common shares.
- In a letter to Lifeway CEO Julie Smolyansky, Danone said it was “disappointed” by the board’s initial response to its previous offer. It noted that the increased price “fully reflects the fundamental potential of the Company.”
- Lifeway has been a major beneficiary of increasing consumer demand for healthier products through its kefir, a dairy beverage similar to yogurt, and fermented probiotic products. Lifeway this week announced net sales during the quarter ended Sept. 30 of $46.1 million, an increase of $5.2 million from the same period a year ago. It marked the 20th consecutive quarter of year-over-year growth for the company.
Dive Insight:
As Danone looks to expand its portfolio of better-for-you dairy products and bring additional growth to its portfolio, the addition of Lifeway would certainly help it meet both of those goals. But as is often the case in M&A, Lifeway pushed for a higher price after rejecting Danone’s initial proposal.
While the new price amounts to an increase of $2 per share, it remains to be seen whether that will be enough to satisfy Lifeway. In a statement issued late Friday afternoon, Lifeway said it “will carefully review and evaluate the revised proposal to determine the course of action that it believes is in the best interests of the Company and its shareholders and other stakeholders.”
Danone has been a shareholder in Lifeway for more than two decades and is as familiar with the company as anyone. Due to the fact that it owns nearly a quarter of the company, it’s unlikely that Lifeway will receive another offer from a buyer other than Danone.
“We continue to believe Lifeway has an attractive opportunity to achieve its full potential through a combination with Danone, removing the constraints and additional resources required for a publicly listed company of Lifeway’s size,” Danone said in its letter. “We would welcome the opportunity to discuss this Updated Proposal and next steps with you.”
The acquisition proposal comes as Lifeway has been embroiled in a bitter family dispute between the CEO and her relatives. Edward and Ludmila Smolyansky, the brother and mother of Julie Smolyansky, said in a letter earlier this month they “strongly supported” Danone’s initial offer and urged the board to “seize this opportunity to deliver lasting value to shareholders, employees, and consumers.”
“We encourage the Lifeway board to carefully and in good faith reconsider Danone’s offer,” Edward and Ludmila said. “The longer they wait, the more money they will leave on the table, to the detriment of all.”
Last year, Kanen Wealth Management called Lifeway’s stock undervalued and said the price could not be fully realized with the board and CEO in place. The firm called for Lifeway to explore a sale. Since then, Lifeway’s stock has risen 225%, according to the company.
Update: The story was updated with a comment from Lifeway on the new offer from Danone.
