Paris, May 28 - French investment company Eurazeo plans to sell bonds worth up to 700 million euros ($971.3 million) exchangeable into existing shares in food group Danone to fund new investments.
Eurazeo will also subscribe to the planned 3 billion euro rights issue announced by Danone earlier this week, subject to the final terms of the share sale, it said in a statement on Thursday.
The bonds will enable Eurazeo to take advantage of new investment opportunities arising in the economic downturn and help it partially refinance existing debts relating to its holding of some 5 percent in Danone, Eurazeo said.
Eurazeo said on Thursday it had exercised an option to increase its bond offering, and had raised the amount to 610 million euros.
The size of the offer may be further increased to a maximum of around 700 million euros if BNP Paribas and Credit Agricole's Calyon, who are lead managers for the issue, decided to exercise their over-allotment option.
The nominal value of the bonds was set at 45.25 euros, reflecting an issue premium of 25 percent over Danone's reference share price, Eurazeo added.
"This transaction will allow Eurazeo to benefit from the upside potential in the Danone share price, up to the issue premium, over a five-year period," Eurazeo said. "Eurazeo reaffirms its confidence in Danone's future prospects."
The bonds will have a 5-year maturity and will bear interest at an annual rate of 6.25 percent.
Danone, the world's biggest yoghurt maker and owner of Evian bottled water, said this week it planned to launch a rights issue in the coming days to help cut its net debt and fund small and mid-sized acquisitions.
Eurazeo said the nominal value of the five-year bonds would reflect an issue premium of 25-30 percent over Danone's share price. The annual interest rate on the bonds would be between 5.75 and 6.50 percent.
Danone shares were down 2.5 percent at 36.15 euros in mid-afternoon trade, while Eurazeo was up 2.7 percent at 33.89 euros.
French bank Credit Agricole owns roughly 17 percent of Eurazeo's share capital.