Danone's U.S.-listed shares rose nearly 7 percent percent on a report that Corvex Management now owns a stake of about $400 million and rumors surfaced of a possible takeover.
Bloomberg reported that Keith Meister's activist hedge fund has grown its stake in Danone because it thinks the company is greatly undervalued. The fund also reportedly thinks the company can rebound with improvements to operations, Bloomberg reported, though it does not currently plan to publicly advocate for management changes or launch a proxy battle.
Before Monday's gains, Danone's American shares had fallen 1.41 percent over the last year. The company is known for its yogurt products but also produces water, baby food and nutritional solutions.
Over the weekend, the New York Post published story that said several companies might be interested in buying Danone. An anonymous source told the Post that Danone "could be bought by a Kraft or a Coke, and the French government would allow it."
Stifel analyst Mark Swartzberg addressed the New York Post story Monday in a note to investors. He said Kraft Heinz could be a possible buyer but he rebuffed the idea that Coca-Cola would be interested in Danone. A more likely suitor, Stifel said, would be PepsiCo.
"Not only because it evidently explored a purchase in 2005 until perceived resistance from France's government became an obstacle, but also because (Coca-Cola) is squarely focused on beverages, while (PepsiCo) is a major in food, including the cold section of retail (e.g., Tropicana), and, in our opinion, recent (PepsiCo) manager comments and fundamentals make a transformative transaction more possible," Swartzberg said.
Kraft Heinz failed a takeover of Unilever earlier this year. Wall Street is awaiting another bid from the company. Stifel said it still thinks Unilever is the "most likely preferred target," though Mondelez, General Mills, Kellogg and Campbell Soup could also be of interest.
Last year, Danone bought WhiteWave Foods for $12.5 billion. The purchase included perceived health and wellness brands like Soy, maker of nut-based milks, and Horizon, an organic milk brand.
CNBC reached out to Danone and PepsiCo for comment but a spokesperson wasn't immediately available. Kraft Heinz and Coca-Cola declined to comment.