Healthy Value Opportunity: Groupe Danone SA (ADR) (DANOY), H.J. Heinz Company (HNZ), Kraft Foods Group Inc (KRFT)

French protectionism
While Mr. Peltz has most recently made headlines for the H.J. Heinz Company (NYSE:HNZ) acquisition, potential investors should be aware that another Berkshire-like buyout is unlikely in the case of Danone. French politicians in recent years have become very protective of industries they view as strategically important to the French economy (which Danone’s importance to France rises to that level).

When PepsiCo, Inc. (NYSE:PEP) was rumored to make an acquisition bid for Danone back in 2005, French lawmakers quickly drafted what is commonly referred to as the “Danone Laws” to make it difficult for a foreign entity to take over the French dairy powerhouse. Back in 2005 when the French and European economies were seen as strong and healthy, that level of protectionism could be seem as a bit meddling. With the state of the European economy today, that protectionism might now be seen as more of a necessity to protect French industries during this difficult economic environment from being taken over by opportunistic foreign investors.

Bottom line
Health food in general and yogurt in specific are some of the best investing opportunities in the market today. Europe has certainly been challenging for the French food giant. Danone has done their best to manage their European exposure, while also doing a superb job of moving into the faster-growing regions of the world. Once the European economy improves and European consumer confidence returns, maybe the market will finally reward the company for all of their outstanding growth outside of Europe.

The article Healthy Value Opportunity: Danone originally appeared on and is written by Matthew Luke.

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