Stonyfield, the large U.S. organic yogurt company, is up for sale and General Mills is considered by analysts as a potential buyer.
France's Danone agreed in principle with the U.S. Department of Justice to sell the New Hampshire-based yogurt brand to avoid antitrust issues that could impede its $10.4 billion acquisition of WhiteWave Foods.
Dean Foods and Golden Valley-based General Mills are the most likely suitors for the organic yogurt company, said Credit Suisse food industry analyst Robert Moskow.
"Stonyfield would fit [General Mills] management's strategy to increase its presence in natural and organic products and reach its objective for $1 billion in natural and organic product sales by 2019," Moskow wrote in a note to investors Friday afternoon. "We would view Stonyfield's positioning as complementary to the brands in General Mills' yogurt portfolio."
Yoplait is General Mills' largest yogurt brand while its Annie's and Liberte brands are its newer, organic offerings. The company also owns Mountain High yogurt, which is fashioned as a natural product.
While Stonyfield could be a good fit for General Mills, the company's yogurt business has languished in recent years. The company has continuously lost significant market share to Greek-yogurt king Chobani and other upstart brands and struggled to create sustained growth through new products.
"Given all the troubles the company has had in the yogurt category [Yoplait was down 18 percent last quarter], it probably does not have the appetite for integrating yet another brand to the mix," Moskow added.
Stonyfield is also likely to fetch a high price, which could make a purchase less palatable to General Mills.
Danone agreed to sell Stonyfield over concern the merger would create a dairy monopoly.
Denver-based WhiteWave already controls nearly 25 percent of the organic milk market with its Horizon Organic brand.
The company has other yogurt heavyweight brands such as Wallaby Organic and Silk, while Danone brings Oikos and Activia yogurts to the marriage. Danone has had a stake in Stonyfield since 2001 and took full ownership in 2014.
The merger presented another potential conflict involving La Farge, Wis.-based Organic Valley — the No. 2 brand in the organic milk marketplace behind Horizon. Organic Valley supplies milk to Stonyfield for its products.
Since Organic Valley and Horizon are competitors, the deal could potentially jeopardize Organic Valley's supplier relationship with the new megacompany's ownership of Horizon. Danone's agreement to divest Stonyfield, with revenue of $370 million last year, alleviates that concern.
Organic Valley also supplies milk to General Mills for its organic dairy products.