Milk alternatives have seen a rise in popularity over the years, yet dairy remains a significant food group and a highly profitable industry globally.
Projections indicate that milk production is set to grow at an average rate of 1.7% by 2030, outpacing many other agricultural consumption products. This sustained demand for dairy products continues to drive numerous global companies.
According to the Global Dairy Top 20 rankings for 2023, Danone holds the fourth position in the dairy industry, with a market capitalization of $49.53 billion.
Danone, the French dairy conglomerate (GPDNF), has established a strong international presence with multiple household brands such as Activia, Oikos, and Silk. In its Q2 2024 earnings report, Danone reported a 4% increase in net sales on a like-for-like basis, a 2.6% rise in net income, and a 2.6% boost in EPS from the previous year.
Such business success positions Danone as a potential acquirer of smaller competitors. Recently, Danone has shown interest in acquiring another company, but this potential acquisition involves navigating through complicated ownership issues.
Lifeway Foods (LWAY), an American leading supplier of kefir and fermented probiotic products, is at the center of this interest. The company, despite its market success, has been embroiled in a familial dispute affecting its leadership.
Founders Ludmila and Edward Smolyansky have long been in conflict with the current CEO, Julie Smolyansky, who is also a family member. The dissension has manifested in accusations against Julie and the Board of Directors, alleging business mismanagement at Lifeway Foods.
In a consent statement filed with the U.S. Securities and Exchange Commission on August 20, Ludmila and Edward demanded a leadership overhaul as part of their “Back to Lifeway” campaign. The campaign aims to remove the current Board of Directors and CEO, citing a need to prioritize growth and innovation over what they view as personal agendas.
Despite these internal conflicts, Lifeway Foods reports steady business performance. The Q2 2024 earnings report shows a 25% increase in net sales and a 17% rise in net income compared to the previous year. Additionally, the company’s EPS exceeded analysts’ expectations by 25%.
Amidst this turmoil, Danone made an offer to acquire Lifeway Foods, submitting a regulatory filing proposing to buy the company for $25 per share. This offer represents a 59% premium to Lifeway Food’s three-month average price of $15.74 at the time of the filing.
Danone and Lifeway Foods share a long-standing relationship, with Danone holding a 23.4% stake in Lifeway Foods for over 20 years.
By Monday’s market close, Lifeway Food’s stock was valued at $21.50 per share with a market cap of $318 million. Following the announcement, the stock surged nearly 24%, closing at $26.57 at the end of Tuesday’s market session.