Danone offers $283M to acquire the remaining shares of kefir maker Lifeway Foods. The bid comes amidst a family feud and shareholder calls for a sale. Lifeway’s leadership faces scrutiny over governance and business performance.
Introduction
Dairy giant Danone has taken a significant step toward expanding its portfolio of health-focused products by offering to acquire the remaining shares of kefir maker Lifeway Foods for $283 million. Danone, already a 23.4% shareholder in the company, aims to purchase the remaining shares for $25 each, a 59% premium over Lifeway’s recent average stock price. This offer arrives amid growing tension within Lifeway, driven by both a familial dispute and calls from shareholders to sell the company.
Danone’s Acquisition Proposal
Danone’s interest in Lifeway Foods is not new, having held a stake in the company for over two decades. This recent proposal to acquire the remaining shares is a clear signal of Danone’s confidence in the potential of Lifeway’s business. The proposed $25-per-share deal reflects a 59% premium over the company’s average price of $15.74 in the last three months and values the company at approximately $283 million. Lifeway’s stock has seen a recent uptick, closing at $21.50, with a market cap of $318 million.
In a letter to Lifeway, Danone emphasized that the offer provides a compelling proposition to the company’s shareholders and aligns with the long-term potential of the business. Shane Grant, CEO of Danone North America, highlighted that Lifeway’s growth and solid performance in recent years demonstrate the kefir maker’s potential to thrive further with the resources and scale that Danone can provide.
Lifeway’s Business Growth and Consumer Demand
Lifeway Foods, known for its kefir and fermented probiotic products, has been riding a wave of consumer interest in gut health, a trend amplified by the COVID-19 pandemic. In 2023, Lifeway reported record sales of $160 million, reflecting a 13% increase from the previous year. The company has achieved an impressive 19 consecutive quarters of year-over-year growth, demonstrating its resilience and ability to meet evolving consumer preferences.
Kefir, Lifeway’s flagship product, is a dairy beverage similar to yogurt but with distinct probiotic properties. It has gained popularity among health-conscious consumers, particularly those seeking natural ways to support digestive health. Julie Smolyansky, CEO of Lifeway Foods, has noted that kefir is increasingly sought after by individuals managing conditions like Crohn’s disease and irritable bowel syndrome (IBS). Moreover, the product is also recognized for its benefits in promoting bone and heart health.
Danone’s Strategic Fit
For Danone, acquiring Lifeway would bolster its existing portfolio of health-focused dairy products. The multinational dairy company is already a leader in the probiotic space with its Activia line of yogurts, and it also caters to the growing demand for low-sugar options with products like Too Good yogurt. The addition of Lifeway’s kefir offerings would not only diversify Danone’s product range but also allow the company to leverage its global distribution network and marketing expertise to scale Lifeway’s products more effectively.
In his letter, Grant expressed confidence that Danone’s operational resources could help unlock additional value for Lifeway. He pointed out that removing the constraints of operating as a small, publicly listed company would enable Lifeway to focus on innovation, expand distribution, and enhance its marketing efforts. Danone’s global reach could also provide Lifeway with the tools needed to meet rising consumer demand for healthy, probiotic-rich products in markets outside the U.S.
The Familial Dispute and Shareholder Pressure
The timing of Danone’s offer is significant, as Lifeway has been embroiled in a bitter internal dispute for several years. The company’s CEO, Julie Smolyansky, has faced public criticism from her mother, Ludmila Smolyansky, who founded Lifeway, and her brother, Edward Smolyansky. Both family members have called for Julie’s removal from her leadership role, citing concerns over governance and the direction of the company. This feud has further intensified shareholder dissatisfaction.
Kanen Wealth Management, a significant shareholder in Lifeway, has been vocal in its criticism of the company’s leadership. Last year, the firm labeled Lifeway’s stock as undervalued and argued that the board, under Julie Smolyansky’s leadership, was not maximizing the company’s financial potential. Kanen urged Lifeway to consider selling itself, estimating that the company could fetch between $15 and $20 per share — a valuation that Danone’s offer now exceeds.
The family discord has only fueled calls from investors for a strategic change. Last month, Ludmila and Edward accused the Lifeway board of presiding over “significant and repeated failures of corporate governance.” In particular, they argued that the company’s leadership had been slow to adapt to industry trends and had failed to capitalize on opportunities in the growing health-focused food segment.
Edward Smolyansky went so far as to claim that Lifeway was suffering from a lack of leadership, which had hindered its ability to keep up with trends that could drive its growth. The family turmoil has cast a shadow over Lifeway’s otherwise solid financial performance, and many investors see a sale as a way to resolve these internal issues while securing a favorable financial outcome.
Potential Outcomes and Industry Implications
While Lifeway has acknowledged receipt of Danone’s offer, the company has yet to make a formal decision. The board has stated that it will carefully review and evaluate the proposal before determining its course of action.
If the deal goes through, it would mark the culmination of Lifeway’s journey from a small family business to a key player in the probiotic dairy space. It would also signify Danone’s continued push to strengthen its health and wellness offerings, particularly in the growing probiotic sector. By acquiring Lifeway, Danone would solidify its position as a leader in functional dairy products, further enhancing its ability to meet the demands of health-conscious consumers worldwide.
For Lifeway, a sale to Danone could mean an opportunity to put its internal disputes behind it and focus on expanding its reach in both domestic and international markets. With the resources of a global dairy giant like Danone, Lifeway could accelerate its innovation pipeline and scale its production to meet the growing demand for probiotic-rich products.
Conclusion
Danone’s bid to acquire Lifeway Foods is a strategic move that underscores the growing importance of health-focused dairy products in the global market. As consumer interest in gut health and functional foods continues to rise, companies like Lifeway are well-positioned to thrive. However, internal conflicts and shareholder dissatisfaction have clouded Lifeway’s future, making Danone’s offer an attractive option for resolving these issues while unlocking the company’s full potential.
With a decision from Lifeway’s board expected soon, the outcome of this proposed acquisition could have significant implications not only for the company’s shareholders but also for the broader dairy industry. If successful, the deal would further cement Danone’s position as a global leader in health and wellness products, while providing Lifeway with the resources and stability needed to achieve long-term growth.
