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Danone SA has made a non-binding proposal to acquire Lifeway Foods, a producer of kefir and probiotic products, for approximately $283 million (or $25 per share).

This offer comes as Lifeway Foods navigates internal leadership disputes and shareholder pressures to explore strategic alternatives.

Danone, which currently holds a 23.4% stake in Lifeway, has expressed confidence in the potential benefits of a merger, citing Lifeway's recent performance and market position.

The proposed acquisition price represents a 59% premium over Lifeway's average share price of $15.74 over the last three months.

In a letter addressed to Lifeway’s CEO Julie Smolyansky, Danone emphasised the advantages of combining operations, suggesting that such a move would enhance Lifeway’s growth opportunities by leveraging Danone’s extensive resources in innovation, distribution and marketing.

The letter highlighted Lifeway's consistent growth trajectory, reporting a 13% increase in annual sales to $160 million in 2023, alongside 19 consecutive quarters of year-over-year growth.

The kefir market has seen increased consumer interest, particularly during the pandemic, as more individuals prioritise gut health. Lifeway’s products, known for their probiotic benefits, have become increasingly popular among consumers seeking digestive health solutions.

However, Lifeway is currently facing significant challenges, including a public family dispute involving its leadership. Critics, including major shareholders, have accused the board and Smolyansky of mismanagement and have called for a sale of the company. This internal strife has raised concerns about Lifeway's governance and strategic direction.

Danone's proposal is part of its broader strategy to enhance its portfolio, particularly within the health-focused dairy segment. The company generated €27.6 billion in sales in 2023 and has positioned itself to capitalize on trends related to gut health and nutritional wellness.

The acquisition would require regulatory approval under US antitrust laws, but Danone does not foresee significant hurdles in securing these clearances. The transaction, if completed, could provide Lifeway shareholders with immediate liquidity and a clear exit strategy amid ongoing governance issues.

As of now, Lifeway has acknowledged receipt of Danone’s proposal and stated it will conduct a thorough review to determine the best course of action.

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