Kraft Offers $7.2 Billion for Danone Cookie Unit

Kraft Foods said Tuesday it has made a €5.3 billion ($7.2 billion) offer for the cookies division of Danone Group SA. The acquisition would position Kraft as the world's leading cookie manufacturer. The Danone division, which produces Petit Ecolier and Crème Roulee cookies, posted sales of €2 billion in 2006. Danone will retain its stakes in biscuit businesses in Latin America and India. Some analysts believe Danone, which also produces Dannon yogurt and Evian bottled water, will become an appealing takeover target if the sale is completed. The offer follows Kraft's agreement a year ago to buy a unit of U.K. food company United Biscuits Ltd. According to the WSJ, the acquisition of Danone's cookie business would "nicely fill" a "hole in [Kraft's] European biscuits portfolio." "Kraft wants to become the indisputable leader in the biscuit market," said fund manager Alain Crouzat. "They need the operations in Europe, where they are weak now." There is some speculation that activist investor Nelson Peltz, who holds a 3% stake in Kraft, has been agitating for the company to make acquisitions.

Sources: Bloomberg, Reuters, Wall Street Journal
Commentary: Kraft Is In Talks to Buy Danone's Biscuit and Cereal Unit -- FT • Kraft Foods May Go On a Value-Creating Acquisition Spree • Kraft Foods Jumps On Reports of Peltz's 3% Stake
Stocks/ETFs to watch: Kraft Foods Inc. (KFT), Groupe Danone [ADR] (DA). Competitors: General Mills Inc. (GIS), Del Monte Foods Company (DLM), Kellogg Company (K). ETFs: PowerShares Consumer Goods ETF (PRFG), Consumer Staples Select Sector SPDR (XLP), Ultra Consumer Goods ProShares (UGE)

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