Shares in Danone’s, which is expected to hold a board meeting on Monday amid shareholder pressure to improve governance and boost returns, rose 2% after it announced plans to sell its stake in Chinese dairy firm Mengniu.
Danone will use the gains from the sale to buy back its own shares, the French food company said in a statement issued late on Sunday.
“We see this as a further positive step in tidying up Danone’s non-core portfolio and a signal of serious intent on the portfolio generally, consistent with recent announcements,” Jefferies analysts wrote in a note.
Danone Chairman and CEO Emmanuel Faber, under growing pressure as shareholders push for changes to improve its governance, is due to hold a meeting later in the day, a source familiar with the matter said.
U.S. investor Artisan Partners joined BlueBell Capital Partners on Friday in urging Danone to find a new CEO to speed up efforts to boost returns. They have also called for the role of CEO and chairman to be split.
In recent months Faber had intensified actions to ward off activist investors, announcing in November a plan to cut 2,000 jobs, trim product ranges and sell some assets, including the group’s business in Argentina and the Vega plant-based brand.
Danone said on Sunday that following a review of its portfolio it had reached an agreement to convert its indirect stake in China Mengniu Dairy Company Limited, a company Danone first invested in in 2013, into a 9.8% direct holding in the Hong Kong-listed group.
A sale of the direct stake could follow this year in one or several transactions depending on market conditions.
Danone said the indirect stake had a book value of about 850 million euros ($1.03 billion) and contributed 57 million euros to its income in 2019.
Faber, in his seventh year as chief executive, has pursued a strategy centred on diversifying into fast-growing products featuring probiotics, protein and plant-based ingredients to mitigate slower growth in dairy.