Kraft Bids $7.2B For Danone Biscuit Unit

Sale includes brands LU, Petit Dejeuner, Tuc, Mikado and others; Danone to concentrate on its dairy products and water divisions.

PARIS (AP) - Kraft Foods Inc. said Tuesday it offered US$7.2 billion in cash to acquire the biscuit division of French food company Groupe Danone SA.

Danone said in a statement that its board is considering the bid on an exclusive basis. Kraft made the offer to buy the biscuits and cereal division, which includes brands LU, Petit Dejeuner, Tuc, Mikado and others, on Monday, Danone said.

The sale would allow Danone to concentrate on its dairy products and water divisions, Danone Chief Executive Franck Riboud said. Proceeds from the sale will be used to speed up current internal development projects, develop new products, expand into new areas and possibly make new acquisitions.

''The offer of Kraft Foods represents a strong strategic and industrial opportunity for the biscuits and cereal products business,'' Danone said in its statement.

Under the terms of Kraft's offer, the biscuits division will continue to be based in France. Kraft agreed to keep all Danone biscuit manufacturing facilities in the country in operation for at least three years after the transaction is signed.

Under French law, Kraft said in a statement, Danone must consult with its Works Council before entering into a definitive agreement.

''This proposed acquisition makes great sense for Kraft,'' said Kraft Chairman and CEO Irene Rosenfeld. ''It will increase our presence in snacks—our fastest growing global segment—and transform our international business.''

The offer does not include Danone stakes in biscuit businesses Bagley in Latin America and Brittannia in India.

The deal could be concluded in the last quarter of 2007 and is subject to regulatory approval, Danone added.

Shares in Danone rose 2.1 percent to US$84.78 in trading that resumed after a brief suspension Tuesday.

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