Danone is preparing to sell its stake in a Chinese dairy company to fund stock buybacks as the French company tries to boost shareholder returns amid pressure from disgruntled investors.
Danone said Sunday it plans to sell its stake in China Mengniu Dairy Co., which has a market value of more than $2 billion, later this year. Most of the proceeds would be used to fund share repurchases. Danone shares rose as much as 2.6%.
The announcement comes hours before Danone’s board reportedly meets to discuss its response to calls from investors such as Artisan Partners Asset Management Inc. for management changes. Danone Chairman and Chief Executive Officer Emmanuel Faber is facing demands for him to give up one or both of his positions at the company, which he has led since 2014.
Photographer: Christopher Goodney/Bloomberg
China Mengniu climbed 1.5% early Monday amid a broader market rally in Hong Kong. Shares of the company, which makes milk, ice cream and cheese, have gained 54% over the past 12 months.
Faber said last month that Danone will divest assets that don’t contribute to profitable growth. The CEO is under scrutiny after Danone shares lost a quarter of their value last year. Bluebell Capital Partners has also called on the company to replace him.
Danone first took a stake in Mengniu in 2013. Its 9.8% holding is currently held indirectly in a venture with COFCO Corp., Mengniu’s biggest shareholder, and first Danone will convert the investment into a direct holding.
The conversion process is subject to regulatory approval and the divestiture could take place in one or several transactions, depending on market conditions, the French company said. The book value of the holding is 850 million euros ($1.03 billion).
Mengniu said in a bloomberg.com
