The news this week that US kefir drinks and cheese maker Lifeway Foods has rejected a takeover offer from Danone may have raised a few eyebrows.
And it will also raise questions about the strategy of both businesses.
Alpro and Activia maker Danone already holds a 23.4% interest in the Nasdaq-listed Lifeway. In September, the French dairy giant revealed it wanted to own the business outright, offering to buy the remaining shares at $25 a piece.
The proposed move attracted a positive reaction from industry analysts covering the sector, who could see benefits for both businesses.
But Lifeway has rejected Danone's offer, arguing it undervalued the business. When Danone made its bid, the company said it amounted to a 59% premium to $15.74, Lifeway’s average price during the previous three months.
Danone, which declined to comment on Lifeway’s decision, may well go back in with an improved offer of course but, in the meantime, its target has announced a rights issue.
Lifeway said the plan is intended to enable all shareholders to realise the full value of their investment in the business. However, it will also block Danone from taking full control of the company through open-market share purchases without paying a premium to shareholders. Not that Danone has suggested that is its intention.
One interesting factor here is the fractious corporate history at the top of Lifeway.
A long-running family dispute over control and leadership of the company has grabbed the headlines in recent months.
In August, Ludmila and Edward Smolyansky, Lifeway's largest investors, filed a consent statement to unseat the company’s current board of directors, including CEO Julie Smolyansky.
Ludmila and Edward – the mother and brother of Julie – said at the time they were trying to bring in leadership “committed to revitalising the company with a strategic vision aligned with the best interests of its shareholders”.
Against this backdrop, was Danone’s bid – "strongly" supported by Ludmila and Edward incidentally – on the low side, as Lifeway suggests, in order to take into account the difficult situation it would inherit? Or a punt to pick up a business that has made a name for itself in a fast-growing category at a bargain price?
The kefir maker remains open to offers. Lifeway's statement accompanying the rejection of the Danone bid said its rights plan does not “preclude Lifeway’s board from considering an offer that is fair and otherwise in the best interests of the company’s shareholders”.
Whether that bid comes from Danone remains to be seen. If Danone thinks Lifeway would be a good addition to its portfolio, it may well come back with a better offer.
From Lifeway's perspective, if it is serious about selling, it will hope that a bid it described as undervalued doesn’t turn out to be the best it’s going to get.
After all, another would-be acquirer would either have to convince Danone to sell its stake or be happy with existing alongside such a heavyweight minority shareholder.
We await the next move with interest.
