PARIS Danone (DANO.PA) shares rose 3 percent on hopes that activist investor Nelson Peltz would push for cost cuts and operational changes to boost margins at the French food group.
Peltz, co-founder of U.S. investment firm Trian Fund Management LP, has bought a 1 percent stake in the world's largest yoghurt maker, the Financial Times reported on Wednesday.
The billionaire businessman, who often wrestles with management at companies he considers undervalued or poorly managed, will ask Danone Chief Executive Franck Riboud to work on improving operating margins by 100 basis points to 15.1 percent by 2015 and return all excess cash through share buybacks, the Financial Times said.
Peltz was not immediately reachable for comment and a Danone spokeswoman would only say that the company had not been informed by Peltz or his fund that he had crossed the threshold of 0.5 percent of the company's stock.
By 1018 GMT, Danone shares were 2.64 percent higher at 49.40 euros ($63.24), outperforming the European food sector .SX3P.
"Danone has been criticized for not doing any big-bang restructuring in western Europe or publicly talking about large layoffs, in contrast to other companies, such as Unilever (ULVR.L), and this could be a trigger for more aggressive action," Kepler Capital Markets analyst Jon Cox said.
Danone issued a surprise profit warning in June after Spanish consumers switching to cheaper yoghurts hit growth at its core dairy division.
The warning raised doubts about the credibility of Danone's forecasts, analysts said at the time, coming after a number of nasty surprises, such as its 2009 rights issue and the hefty price it paid for Dutch baby food producer Numico in 2007.
Since the warning, Danone shares have lost 4.6 percent, sharply underperforming a 9.7 percent gain in its sector.
Danone last month told investors it would buy back shares worth between 500 million and 700 million over the next four months.
In recent months Peltz has revealed stakes in companies ranging from InterContinental Hotels Group (IHG.L) and PepsiCo (PEP.N) to Heinz HNZ.N and Ingesoll Rand (IR.N) in an effort to push for changes.
In some cases, Peltz sold the investment soon after, as with PepsiCo.
Peltz is also famous for being instrumental in the break-up of Britain's Cadbury, building a stake in Cadbury Schweppes and pushing it into a decision to demerge in 2007. After the split, Cadbury was taken over by Kraft in 2010.
Analysts emphasized that Danone is no Cadbury and that they do not expect a major overhaul of the company's strategy, pointing out that a 1 percent stake, if confirmed, is hardly game-changing.
Bernstein Research analyst Andrew Wood said that, despite Danone's troubles, CEO Riboud is "still very highly regarded within the company and in the large business-investor community in France".
The Trian fund, though viewing Danone as undervalued, would not seek any radical action, the Financial Times said, citing sources familiar with Peltz's plans.
Analysts said it was one thing for hard-nosed U.S. investors to march into a British or U.S. company to demand changes, but another matter to deal with a "national champion" such as Danone.
"It should be remembered that in the past when it was rumored that either Kraft or Pepsi would make a bid for Danone, the French government quickly stepped in and deemed Danone as being a 'protected industry'. We see little sign that this philosophy has changed," Wood said. ($1 = 0.7812 euros)
(Editing by David Goodman)