Danone on the rise, Artisan Partners for strategic changes

Danone on the rise, Artisan Partners, calls for strategic changes. The American management company Artisan Partners on Thursday called Danone for a strategic change to separate the functions of chairman and chief executive officer, in a letter addressed to Gilles Schnepp, the group’s lead director agrifood.

In reaction to these announcements, the Danone share gained 2.1% around 1:45 p.m., to 54.46 euros.

Artisan Partners, who claims to be Danone’s third shareholder with more than 3% of the capital, laments in his letter that the “financial performance of Danone” is “not in line” with the quality of its assets. “Danone has struggled for years to find the recipe for converting products that people love into financial performance. This is untenable and creates a situation which, we believe, demands simple and immediate remedies,” he told Agefi-Dow Jones agency David Samra, managing director of Artisan Partners.

The management company criticizes, in particular, the governance of Danone and considers that the functions of Chairman & Chief Executive Officer should be separated. “Besides, good corporate governance would require directors to be truly independent, which excludes the previous management team,” adds the management company. Cécile Cabanis, former financial director of the group, was recently appointed vice-president of the board of directors, which raised many questions.

“We are pleased to see that other key Danone shareholders share our point of view on the need to make changes to the governance of the company,” said on Thursday the British activist fund Bluebell Capital Partners. It had demanded in January the departure of CEO Emmanuel Faber. Bruno Le Maire, Minister of Economics and Finance, then declared that the French state would be “vigilant” on the group’s governance.

“Danone is also likely to consider a merger, an acquisition or a transfer of assets, which would complicate and further weaken the “company’s business, regrets Artisan Partners. “The timing has become crucial, and the opportunity presents itself today to make the changes that would revitalize the company,” she continues.

Citi analysts believe that Danone must, in particular, consider asset disposals to improve its financial parameters. “Our analysis indicates that around 10% of the portfolio could be monetizable as part of a strategic review,” said the bank in a note published Thursday.

“Lack of experience” in counselling

Artisan Partners, who points to the group’s board of directors’ “lack of experience” in consumer goods, claims to have worked out a plan with Jan Bennink, former head of Danone’s dairy division and former CEO of Numico, a baby food products company acquired in 2007 by Danone.

“Our plan is based on fundamental long-term growth and value creation” and “does not involve financial engineering or the dismantling or sale of the company,” said in its letter Artisan Partners. They said “look forward” to share this plan with Danone’s board of directors.

“We encourage the Board of Directors to carefully review the plan designed by Artisan Partners in consultation with undisputed industry leader Jan Bennink, for whom we have the utmost respect,” said Bluebell Capital Partners.

“We welcome all investments and constructive views on how we can create value over time,” Danone responded, in a statement sent to the Agefi-Dow Jones agency. “Danone is constantly reassessing how the board of directors and the executive committee carry out their functions, in the interests of the shareholders,” added the group, which says it is open to dialogue.

Artisan Partners presents itself as a long-term management company, specializing in so-called value strategies and says it does not habitually take a public position. For example, she has been a shareholder for 15 years in Sodexo, of which the former CEO, Michel Landel, is now Danone lead director. “We don’t see ourselves as activists. But we are considerate shareholders; we invest for the long term, and we focus on companies with strong fundamentals that are undervalued relative to their long-term intrinsic value,” said David. Samra.

Artisan Partners started buying Danone shares in 2020, after the markets fell during the Covid-19 crisis, deeming the group undervalued. The manager says he has invested 1.6 billion euros in Danone’s capital. He also took a position in the capital of Safran. The fund manages $ 158 billion.