Danone joins forces with Russia’s Unimilk

French food giant Danone and Russia’s Unimilk announced on Friday they were combining their fresh milk interests in Russia, Ukraine, Belarus and Kazakhstan.

Danone, the world number one in milk products, will hold 57.5 percent of the new entity, with Unimilk shareholders taking the remainder.

No value was put on the deal which will be done by way of a contribution of assets and Danone buying shares in the new company, Danone-Unimilk.

The venture should have annual sales of about 1.5 billion euros (1.86 billion euros) with a market share of 21 percent.

Danone and Unimilk said their two businesses were very complementary and there would be significant synergies on sales and cost in the new company.

News of the deal saw Danone’s shares gain 0.56 percent in midday trade while the overall market was modestly firmer.

Danone has been present in Russia for about 20 years and the Russian market plus that of former Soviet states is widely seen as offering fast growth opportunities.

The French company has been building up its business through acquisitions, targeting emerging economies mainly, but it fared badly in China, one of the most promising of all markets for dairy products.

It fell out with its Chinese partner Wahaha when Danone alleged that it had discovered that Wahaha chairman Zong Qinghou had set up an entire production and distribution network in parallel to their joint ventures.

After two years of bitter exchanges, the two parties agreed a settlment in late 2009, with Danone selling its share of the business to Wahaha.