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Boston College Law School

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Tuesday, July 3, 2007

Kraft Submits Binding Offer for Danone/Danone's Puzzling Delisting

Kraft Foods Inc. today announced that it has made a binding offer to acquire the global biscuit business of Groupe Danone for EU5.3 billion (U.S.$7.2 billion) in cash.  Some news sources are reporting this as a done deal.  But it is not.  This is only a binding offer and Danone must consult with its Works Council (Comitè d’Entreprise for those who speak the language) prior to entering into a definitive agreement.  In addition, in its own press release Danone states that the offer "could lead to a definitive agreement during the last quarter of 2007 . . . . pending regulatory approvals."  Note the emphasis on could.  And Danone is one of France's  designated national champions protected from foreign takeovers.  The biscuit sale if it goes through is likely only to further make Danone an appealing target for the usual suspects of Kraft itself, Nestle, Pepsi, etc.  Thus expect some political resistance to the transaction. 

NB.  Taking advantage of the SEC's newly effective delisting rules for foreign private issuers, Danone last week took steps to delist and deregister its American Depositary Shares from the New York Stock Exchange.  I'm a little surprised at this.   A U.S. listing provides takeover protection by requiring compliance with Section 13D and the rest of the Williams Act for takeovers (as well as the Securities Act for share offerings) and inserting another regulator, the SEC into the process.  Not to mention it leaves open the U.S. courts for takeover litigation.   In addition, according to Danone's latest Form 20-F, 17% of its shareholders are U.S. residents disqualifying it from the bulk of the cross-border exemptions for takeovers.  Danone may have been better advised by Shearman & Freshfields (their usual counsel) to keep its U.S. listing for the time being.  But maybe Danone is simply relying on a better takeover protector, the French government. 

http://lawprofessors.typepad.com/mergers/2007/07/kraft-submits-b.html

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