LONDON—Shares in French food group Danone rallied on Thursday as media reports revived speculation the owner of some of Europe's best known water brands, biscuits and dairy products could be a takeover target. Danone climbed as much as five percent to a 2003 high of 135 euros, making it the top gainer in the blue-chip DJ Stoxx 50.
France's La Tribune newspaper said Coca-Cola Co or arch rival PepsiCo could make a bid for the Paris-based company, which again played down the speculation.
"This is a classic, old, recurrent rumour and we do not understand why, since it is such a repeated rumour, it should set off such a reaction," a Danone spokesman said.
Danone's water business, including marquee brand Evian, would be an attractive asset for Coca-Cola, which is trying to build its presence in Europe, said Merrill Lynch European beverage analyst Philip Hawkins.
"This is not a new story; it's one that comes up from time to time, but it does have some potential. It makes sense that there would be some interest of it as a possible target," said Hawkings, who has a neutral rating on Danone.
Danone and Coca-Cola already have a joint venture water business and Danone's fresh dairy unit could be spun off and sold to a global food group such as Kraft or Nestle, he added.
"I give some credence to the overall concept of a takeover at some stage, but I don't see management being in favour of it and it would have to be at substantially higher than the current share price."
Traders said the recurrent takeover speculation was one of the reasons for Danone's outperformance versus its peers.
Since the start of the year, Danone has climbed 3.2 percent, compared with a 4.9 percent slide in the DJ Stoxx food and beverage index.
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