By Ding Qi (chinadaily.com.cn)
Updated: 2007-11-06 17:32

Letter of impeachment

On October 15, Danone announced it would sell its entire 20.01 percent stake in the Shanghai-based Bright Dairy & Food Co Ltd to the company's two shareholders for 4.58 yuan (61 US cents) per share.

Danone said it made the deal because there was no hope for full control of the dairy company after its restructuring. Nonetheless, the low ball price triggered suspicions.

"Share price of Bright Dairy at the moment is around 14 to 15 yuan. There are almost no restrictions for Danone in selling its portion via the stock market," the paper quoted an industry insider as saying.

"Instead, Danone not only sold them at one-third of the market price, but also allocated 330 million yuan to cover Bright Dairy's expense on marketing and sales channels" the source said, suggesting it may have something to do with an impeachment letter against Danone.

The paper said the letter, written by a man named Li Su, accused Danone of illegally acquiring 2.5 million shares of Bright Dairy from the local State-owned assets operation company as early as 2003. Li had intended to send the letter to the local discipline inspection committee.

It was not known whether the letter had forced Danone to compromise in negotiating the stake transfer. Danone has not responded so far, according to the paper.

However Frank Riboud, Danone CEO, vowed recently to adjust its investment strategy in emerging economies and to bring the dispute with Wahaha to a complete end, implying the food giant has realized it faces tough decisions in China and may have to drastically rethink its approach.

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