French business. Overreacting? Moi?

The French are in a tizzy over rumours of an American bid for Danone

TALK about paranoid. Suddenly, all of France is defending a national champion against a non-existent attack. This week, French politicians on all sides have been talking gravely about the dangers of Danone, a big French food firm, falling into American hands. Even Dominique de Villepin, the prime minister, has promised to “defend the interests of France” amid rumours of a pending bid by PepsiCo, one of the world's biggest food firms, for Danone, whose shares jumped as a result by over 13% on July 19th. No matter that Pepsi has denied building a stake in Danone and declines to comment on reports of takeover talks.

Speculation about a bid for Danone has ebbed and flowed frequently in the past three years. Danone is focused on bottled water, dairy products and biscuits. It is the world's largest yogurt maker. Its Evian water dominates one of the fastest-growing segments in the food industry. On July 21st, it reported healthy net profits of €347m ($446m) in the first half of this year.

Yet this is the first time that the rumours of a bid for Danone have prompted such a political mobilisation - evidence of the extreme defensiveness of the country's leaders since its voters said no to Europe's new constitution in May. Patrick Ollier, head of the economic affairs committee in the National Assembly, vowed to enlist the aid of French institutional investors to defend Danone. On July 19th, Laurent Fabius, a prominent Socialist politician, appealed to Jacques Chirac, France's president, to fight to keep Danone a Europe-based French group. Le Figaro said that the rumours about a takeover of Danone were reviving memories of the “traumatism” of the takeover of Pechiney, a French aluminium maker, by Canada's Alcan.

Danone has a special place among the jewels of corporate France - a food firm in the land of culinary excellence. Its brand is one of the best known in Europe. Antoine Riboud, its founder, used to say that “Danone is like the cathedral of Chartres, and one does not buy the Chartres cathedral”. His son Franck, the current boss, says he is similarly committed to an independent Danone - though there is talk that a bid of €25 billion might do the trick. Of the big global food groups, Pepsi is widely regarded as much the best fit for Danone. But how on earth will the French establishment react if the American firm actually makes an offer?

The French are in a tizzy over rumours of an American takeover bid for the Danone food company.

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