Exit Danone, enter Kraft?

If Nusli Wadia was looking for a new partner for Britannia Industries, he didn't have to wait too long-and didn't have to do too much. His current joint venture ally, Groupe Danone of France, is in dialogue with Kraft Foods of the us to sell its biscuits and cereal products portfolio that includes brands like LU, Cracotte and Petit Dejéuner. This will be for the sale of Danone's biscuits and cereal products business across the world except India and in Latin America.

So, what happens to Danone's stake in Britannia? The French foods giant and the Wadia group each own a 25.1 per cent stake in Britannia. It was just a couple of weeks ago when Danone indicated that it was willing to exit this venture. Both the partners have had an uneasy relationship for a while now and Groupe Danone's Secretary General, Philippe-Loic Jacob, told the media recently that he expected the negotiations with the Wadias to end in July. A Wadia group spokesperson says discussions are currently ongoing and should "come to fruition by early September."

Globally, Danone's biscuits and cereal products business registered sales of m2 billion against the company's total revenues of over m14 billion. At an offer price of m5.3 billion, Kraft will be paying a large premium for Danone's biscuits and cereal products business. In a press statement, Danone has said that this business has a leadership position in more than 20 countries. "In 2006, sales volume reached 6,60,000 tonnes," it added.

If Kraft doesn't buy out Danone's stake in Britannia, the French corporation may decide to sell it to the Wadias. So, what will be the value of that holding? At Britannia's current market capitalisation of around Rs 4,100 crore, Danone's 25.1 per cent holding is worth over Rs 1,000 crore. Even if Danone decides to exit at a discount, the Wadias will still end up shelling out a significant amount. There has also been talk of Danone acquiring the Wadias' stake, although the Wadia group spoksesperson says the group "has no intention of putting its stake in Britannia up for sale."