Lifeway Foods rejects Danone’s takeover bid citing undervaluation

USA – Lifeway Foods Inc., a leading U.S. kefir manufacturer, has rejected a takeover proposal from Danone North America PBC. 

The bid, made on September 23, 2024, offered US$25 per share for all outstanding shares not already owned by Danone, which currently holds a 23.4% minority stake in the company.

Lifeway’s board, after consultation with independent financial and legal advisors, determined that the offer “substantially undervalues” the company.

The US$25 per share bid represented a 59% premium over Lifeway’s three-month average price of US$15.74, valuing the company at approximately US$283 million based on its recent stock price of US$21.50. 

Despite this, Lifeway argued that the proposal was not in the best interests of its shareholders or other stakeholders. 

To protect its shareholders’ interests, Lifeway’s board adopted a limited-duration shareholder rights plan, also known as a “poison pill,” effective immediately.

This rights plan, which is set to distribute one preferred share purchase right per outstanding Lifeway common stock to shareholders of record on November 18, 2024, aims to prevent 

Danone from acquiring control of the company without offering an appropriate control premium. Lifeway stated that the plan would provide the board with sufficient time to make informed decisions that align with the company’s long-term strategy.

Meanwhile, Lifeway remains committed to its strategic plan of expanding kefir consumption in U.S. households and venturing into adjacent categories. 

The company highlighted its recent growth, with annual sales reaching US$160 million in 2023, up 13% year-over-year. In Q2 2024 alone, Lifeway posted a 25.3% increase in net sales, primarily driven by higher volumes of drinkable kefir.

This growth trajectory, coupled with the board’s rejection of Danone’s proposal, signals Lifeway’s confidence in its ability to deliver sustained value to its shareholders independently.

The rejection of Danone’s bid comes amidst internal challenges at Lifeway, including a longstanding family dispute. 

CEO Julie Smolyansky, who took over leadership after the death of her father, founder Michael Smolyansky, in 2002, has faced opposition from her brother Edward and mother Ludmila. 

In recent years, the family tensions have escalated, with Edward launching a competing brand, Pure Culture Organics, and calling for Julie’s resignation.

This discord reached a peak in August 2024 when the family filed a consent statement with the U.S. Securities and Exchange Commission (SEC), criticizing the board for its lack of strategic vision and urging the company to explore “strategic alternatives.” 

Although Lifeway resolved a lawsuit against Edward over alleged theft of proprietary information, the underlying family tensions remain unresolved.

Danone, in its letter of intent, emphasized the strategic value of acquiring Lifeway, pointing to the company’s growth potential in the kefir market. 

The multinational food giant highlighted that its offer provided a compelling premium for Lifeway shareholders. 

However, Lifeway’s board remains steadfast in its belief that the company’s future is brighter as an independent entity.

With Lifeway’s Rights Plan in place and the board focused on executing its growth strategy, the company appears set to continue navigating its complex internal and external challenges while striving to maximize shareholder value.

Subscribe to our food and agriculture industry email newsletters that provide busy executives like you with the latest news insights and trends from Africa and the World. SUBSCRIBE HERE