Peltz reports 1 pct stake in Danone, seeks cost cuts

NEW YORK Wed Nov 7, 2012 7:28pm EST

NEW YORK Nov 7 (Reuters) - Activist investor Nelson Peltz has taken a stake of roughly 1 percent in Danone, saying the French food group is undervalued and should implement cost cuts and other operational measures to improve its stock price.

The world's largest yogurt maker is expected to post an operating margin of only 14.1 percent this year, below other large food companies' average margins, which are in the mid-to-high teens, Peltz's Trian Fund Management L.P. said in a statement on Wednesday.

"Trian believes Danone`s shares currently trade at a significant discount to intrinsic value and that targeted strategies to improve performance, such as a leaner cost structure and refraining from dilutive mergers, could generate significant shareholder value," said the investment firm headed by Peltz.

Trian believes Danone's stock has the potential to rise more than 60 percent to 78 euros by the end of 2014, and expects to engage in "constructive dialogue" with management, the investment firm said.

A Danone spokeswoman said earlier on Wednesday 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.

Peltz, who often wrestles with management at companies he considers undervalued or poorly managed, i s 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.