Dean shares jump on Danone rumor

CHICAGO Fri Mar 5, 2010 2:56pm EST

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CHICAGO (Reuters) - Shares of Dean Foods Co (DF.N), the largest U.S. milk producer, jumped as much as 8.3 percent and options in the company were active on Friday, fueled by talk that France's Danone (DANO.PA) could acquire the company.

"There is a rumor circulating that Groupe Danone is interested in acquiring Dean Foods. That possibility has spurred call option buying today in the stock," said Jud Pyle, chief investment strategist at Options News Network, a division of option market making firm PEAK6 Investments.

Among the most active contracts were the March and April call contracts that allow investors to buy Dean Food shares at $17.50 a piece.

Dean Foods overall option volume was 10 times greater than the norm with about 26,000 calls and 3,031 puts traded by late afternoon, according to option analytics firm Trade Alert.

"Many traders first saw the rumors on Internet chat boards," said TD Ameritrade chief derivatives strategist Joe Kinahan.

A spokesman for Danone declined to comment on the chatter. A spokeswoman for Dean did not immediately return a call seeking comment.

Analysts questioned whether Dean would be a target for Danone, which has been focusing on growing health oriented businesses like Activia yogurt in the U.S. While Dean does sell Silk soymilk, its dairy milk business is seen as a commodity operation with little pricing power.

"They (Danone) have growth opportunities in health and wellness. I would much rather they focus on that," Morningstar analyst Phil Gorham said.

Dean shares were up 66 cents, or 4.4 percent, at $15.72 on Friday on the New York Stock Exchange, after trading as high as $16.31 earlier in the session.

(Reporting by Brad Dorfman and Doris Frankel; editing by Gunna Dickson)

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