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General Mills Inc. (GIS)

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General Mills to buy Blue Buffalo for $40 a share

23 Feb 18

LONDON (ShareCast) - (ShareCast News) - US food company General Mills made a move into the pet food market on Friday as it agreed to buy Blue Buffalo for $40 per share in cash, which is around $8bn.
Founded in 2002, Blue Buffalo is the fastest-growing major pet food company making natural foods and treats for dogs and cats under the Blue brand. Over the past three years, the group has delivered compound annual net sales growth of 12% and adjusted earnings before interest, depreciation and amortisation growth of 18%.

The deal is expected to be immediately accretive to General Mills net sales growth and operating margin profile, neutral to cash earnings per share in fiscal 2019 and accretive in fiscal 2020.

Chairman and chief executive officer Jeff Harmening said: "The addition of Blue to our family of well-loved brands provides General Mills with the leading position in the large and growing wholesome natural pet food category and represents a significant milestone as we reshape our portfolio to drive additional growth and value creation for our shareholders.

"We are competing more effectively in our existing categories by really listening to consumers and providing a variety of options that meet their needs. In pet food, as in human food, consumers are seeking more natural and premium products and we have tremendous respect for how attentive Blue Buffalo has been to the needs of their consumers, pet parents and pets, as they have built their brand."

General Mills, which owns brands Annie's, Lärabar and Liberté, said the transaction will be financed through a combination of debt, cash on hand and around $1bn in equity.

It said the deal will give it entry into an attractive growth category. It noted that the $30bn US pet food market is generating consistent 3-4% growth and is highly attractive for retailers based on continued market growth, premiumisation and subscription-like purchase patterns that drive traffic and repeat purchases. It added that Blue Buffalo is the leader in the fastest-growing wholesome natural category, with double-digit growth over each of the last three years.

At 1255 GMT, Blue Buffalo shares were up 17% to $40.02 and General Mills was down 3.9% to $52.82.

Note 1: Prices and trades are provided by Digital Look Corporate Solutions and are end of day values only.


Market Data

Currency US Dollars
52 Week High $59.67
52 Week Low $47.28
Shares Issued 601.90m
Market Cap $31,762m


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