Danone's shares have risen on rumours it may be taken over

Mr Chirac is said to have had French jobs in mind as he stood up against the US drinks giant's predicted move.

"France's priority is to defend its industrial competitiveness and the strength of its businesses," he said.

Mr Chirac's comment came soon after the Evian-mineral water owner reported a small rise in profits for the first six months of 2005.

Danone's first-half operating profits came in at 857m euros (�598m; $1.04bn), up from 820m euros during the same period last year.

The company, which also makes yoghurts and LU biscuits, has seen its shares rise more 16% over the past two days on rumours of a hostile takeover.

'Vigorous base'

A move by Pepsico to acquire Danone would be unpopular among French politicians, several of whom called for any takeover to be blocked.

Speaking on RTL radio on Thursday, finance minister Thierry Breton said France's government would "deploy all its efforts to establish a vigorous and solid industrial base in our country".

Danone said it had not yet received a takeover approach from Pepsico, but was taking the possibility of a bid seriously.

The company sold its British and Irish biscuits businesses at the end of 2004 as it dealt with higher plastics costs and falling prices in France.

Last month, Danone sold HP Foods, the UK-based maker of HP sauce, to US food giant Heinz for �470m.