Danone Shares Jump on Takeover Speculation

Friday, September 16th 2005, 10:47 am

By: News On 6

PARIS (AP) _ Shares of Groupe Danone rose Friday after comments by a French official fueled renewed speculation that the Paris-based mineral-water and dairy-products company could become a takeover target.

In an interview with RTL radio, Industry Minister Francois Loos appeared to distance himself from earlier government pledges to defend Danone from a possible bid by PepsiCo Inc., saying it was the company's responsibility to prepare itself for potential takeover attempts.

``It's up to Danone and its directors to determine what capital structure they need in order to face up to these situations,'' said Loos.

Loos had been asked to comment on a report in magazine Paris Match that Danone was seeking a friendly tie-up with Switzerland's Nestle SA to ward off any bid from PepsiCo, the Purchase, N.Y.-based snacks and soft-drinks giant.

Shares in Danone jumped 4.7 percent on the minister's comments before easing back to 93.90 euros ($114.77) in afternoon Paris trading, a gain of 3.7 percent above Thursday's close.

In July, during a bout of sustained speculation about PepsiCo's intentions, senior government figures lined up to pledge support for keeping Danone in French hands. Prime Minister Dominique de Villepin promised to ``defend France's interests'' and Interior Minister Nicolas Sarkozy said the government should seek to block any bid.

The Finance Ministry is now putting the final touches on a decree, expected in coming weeks, which would allow the government to veto foreign takeovers in 10 newly defined ``strategic'' sectors which officials say will include biotechnology, casinos and pharmaceuticals.

The draft decree has already prompted warnings of legal action from the European Union's head office in Brussels. EU Internal Market Commissioner Charlie McCreevy vowed earlier this month to ``vigorously pursue'' any breaches of EU law resulting from the new anti-takeover measures.

In an interview published Wednesday by Italian daily Il Sole 24 Ore, McCreevy also warned that growing protectionist influences could threaten the EU's economic fabric. ``If they continue, the whole common market will disintegrate,'' he said.