Danone North America has offered $27.00 per share in cash to buy the entire outstanding stock of kefir manufacturer Lifeway Foods, Inc., improving on the initial bid of $25.00 per share.
Danone says the new price implies a 72% premium on Lifeway’s $15.74 volume-weighted average share price in the three months before the dairy major launched its first bid on September 23, 2024.
Danone already owns about 23.3% (3,454,756) of Lifeway’s common shares, according to a public filing with the SEC. The same document shows that there are around 11,364,232 outstanding common shares that Danone doesn’t own, meaning the total improved offer is for approximately $306.8m.
‘Compelling value to shareholders’
The new bid arrives after Lifeway’s board of directors rejected Danone’s initial offer for around $283m in total ($25.00 per share in cash), calling it ‘opportunistic’ and suggesting it did not fully reflect the company’s market value.
The board, chaired by president and CEO Julie Smolyansky, also moved to adopt a shareholder rights plan to avert a potential hostile takeover, after Smolyansky’s brother and mother Edward and Ludmila – who are embroiled in a dispute with Julie over the company’s strategic direction and leadership - appeared to back Danone’s initial approach.
In a letter disclosed with the SEC, Danone deputy CEO Shane Grant told Lifeway Julie Smolyansky that ‘a transaction with Danone will allow Lifeway’s shareholders to realize immediate value and to drive Lifeway’s continued development’.
“We continue to believe Lifeway has an attractive opportunity to achieve its full potential through a combination with Danone, removing the constraints and additional resources required for a publicly listed company of Lifeway’s size,” the deputy chief exec wrote, adding that the new proposed price ‘fully reflects the fundamental potential of the company and provides Lifeway’s shareholders with the certainty of an attractive and immediate cash premium’.
Danone hopes that a definitive agreement could be reached ‘in three weeks’.
Lifeway poised for 'record-breaking net sales'
Danone's improved offer arrived a day after Lifeway's Q3 2024 results revealed net sales of $46.1m, an increase of $5.2m or 12.7% YoY. (Q2: $49.2m, +25% YoY). The sales growth was driven by higher volumes of branded drinkable kefir, the company said. Gross profit as a percentage of net sales was 25.7% for Q3 (Q2: 27.0%).
According to Julie Smolyansky, compared to the same period 5 years ago, YTD net sales and gross profit have grown by 98.4% and 115.3%, respectively.
"We continued to deprioritize private label manufacturing during the quarter, focusing on our branded products to protect Lifeway's category dominance and visibility, streamline operations and further improve margins," she commented.
"As we continue to ship higher volumes of our Lifeway branded products, we will continue to realize manufacturing efficiencies and favorable fixed cost absorption, driving operating leverage across the business. The whole Lifeway team has contributed to our strong operational execution. We are on pace for record-breaking net sales in 2024, and I believe we are poised to continue this excellent momentum into the fourth quarter and 2025."
