General Mills to Buy Pet-Food Maker Blue Buffalo For About $8 Billion -- 2nd Update
February 23 2018 - 9:07AM
Dow Jones News
By Cara Lombardo
General Mills Inc., best known for Cheerios breakfast cereal and
Yoplait yogurt, is paying $8 billion to get back into pet food.
The Minneapolis-based food giant, which has only sold human food
for many years, said Friday it plans to buy Blue Buffalo Pet
Products Inc. as it looks for a piece of the fast-growing natural
pet food market.
Under terms of the agreement, General Mills would pay $40 a
share for Blue Buffalo, a 17.2% premium over its Thursday closing
price of $34.12.
Shares in Blue Buffalo jumped 17% premarket Friday, while
General Mills shares dropped 4%.
Blue Buffalo makes natural cat and dog food and treats under the
"Blue" label, and in its last fiscal year had $1.3 billion in net
sales.
The Blue Buffalo purchase marks the first major deal Jeff
Harmening has struck since taking over as General Mills's chief
executive in June. Mr. Harmening had gained acclaim in previous
roles for spearheading the company's shift toward natural
foods.
Mr. Harmening said in prepared remarks that consumers are
looking for more natural products for their pets, as they are for
themselves. Natural pet food is the fastest-growing piece of the
$30 billion U.S. pet-food market, General Mills said, and accounts
for about 10% of sales volume but about 20% of the revenue.
The deal also comes as General Mills's peers have already
established pet divisions. Earlier this year, Mars Inc. said it
would pay $7.7 billion to buy veterinary and dog day-care company
VCA Inc. J.M. Smucker Co. paid more than $3 billion in 2015 to buy
Milk-Bone owner Big Heart and Nestlé bought the maker of Purina pet
food for more than $10 billion in 2001.
General Mills's offer for Blue Buffalo was "not unexpected,"
Susquehanna analyst Pablo Zuanic said in a research note, and it is
possible other companies could make counteroffers.
With the addition of Blue Buffalo, General Mills would establish
a new pet business segment. It expects to maintain Blue Buffalo's
current Wilton, Conn., headquarters, and Blue Buffalo CEO Billy
Bishop will keep his position.
General Mills produced pet food as far back as the 1930s, when
it sold dog food through feed stores, and in the 1950s it marketed
food for dogs, cats and birds.
General Mills expects the deal to close by the end of its fiscal
year, which is May 27, subject to regulatory approval and other
closing conditions.
The deal has been approved by the boards of General Mills and
Blue Buffalo, and Invus LP and the Bishop family, which together
own more than 50% of Blue Buffalo shares. It doesn't require
additional sign-off from other Blue Buffalo shareholders, General
Mills said.
Blue Buffalo, which has about 1,700 employees, went public in
2015.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
February 23, 2018 08:52 ET (13:52 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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