Pepsi Won't Hit Danone's Spot, It Tells French Regulator

26 July 2005

PepsiCo, manufacturer of the second-bestselling soft drink in the cosmos, isn't about to swallow French dairy products giant Danone, the US company assured French market regulator Autorité des Marchés Financiers last week.

Weeks of mounting speculation that PepsiCo was that way inclined, sent Danone shares spiralling upward by 32% while the French political and business establishment kneejerked into trench-digging mode [WAMN: 22-Jul-05].

On Monday the AMF revealed it had asked PepsiCo to clarify its bid intentions, the latter responding tersely that it was not preparing a bid and declining to provide further information.

A PepsiCo representative told the press: "[We have] been consistent throughout this matter that we do not comment on rumors. When asked recently by the French government, we confirmed that we are in compliance with all French laws and regulations."

Danone, for its part, welcomed Pepsi's statement, while sourly observing that the trading surge in its shares in recent weeks had been "fueled by the absence of a denial."

The AMF, meantime, has opened a preliminary inquiry into possible manipulation of the market in Danone shares. If the review uncovers evidence of possible wrongdoing, the AMF will open a formal investigation. PepsiCo conceded it is in discussion with the regulator on the matter.

The 'no smoke without fire' brigade is far from convinced by PepsiCo's late and grudging denial, wondering if and when its interest in Danone might resurface.

And French finance minister Thierry Breton, himself seemingly a member of the skeptic brigade, publicly urged Danone to consider building a core group of controlling shareholders to protect it from unwelcome suitors.

Data sourced from Wall Street Journal Online; additional content by WARC staff