Danone to merge Russia operations with local dairy

ST. PETERSBURG, Russia (AP) - France's Danone announced on Friday a deal to create the largest dairy in Russia and the former Soviet Union by merging its operations in the region with a Russian firm.

Danone said that by combining its operations with Unimilk total sales in the former Soviet Union - including countries such as Ukraine, Kazakhstan and Belarus - would reach euro1.5 billion ($1.8 billion).

"Almost 20 years after taking our first steps in Russia, Danone-Unimilk represents a strategic move for Danone in a region which is offering a promise of growth in the years ahead, and where we will be pursuing ambitious goals for the future," Danone CEO Franck Riboud said in a statement.

Financial details were not disclosed, but the French yogurt and bottled water producer said that its net debt would grow by euro1.3 billion ($1.6 billion) as a result of the transaction.

Danone said that it would own 57.5 percent of the merged company, with Unimilk owning the remaining 42.5 percent. However, according to the agreement Danone will have the right to own up to 100 percent of the merged corporation by 2022 by buying out Unimilk shareholders.

Danone said the two companies' synergy is ideal since the French have a strong market presence in the European part of Russia while Unimilk has a better profile further east. The company said the merged company would hold a 21 percent share of the Russian dairy market.

The deal, which must be approved by French and Russian regulatory authorities, was announced on the sidelines of a major business forum in St. Petersburg.