￼￼￼￼General Mills’ Acquisition of Pillsbury from Diageo PLC Lauren Sherlock Jason Park
￼General Mills’ Acquisition of Pillsbury from Diageo PLC Situation Analysis: In December 2000, management at General Mills (GM) proposed a plan to acquire Pillsbury, a baked- goods producer, in a stock-for-stock exchange. Pillsbury is currently controlled by Diageo PLC, one of the world’s leading consumer–goods companies. The deal specifies that General Mills is to create and thus issue additional shares of common stock to Diageo in exchange for complete ownership of the Pillsbury subsidiary. If the deal is executed, Diageo will become General Mills’ largest shareholder. The consideration to Diageo would include 141 million shares of the company's common stock and the assumption of $5.142 billion of Pillsbury debt, making the deal worth over $10 billion. In addition, the agreement will contain a contingency, as up to $642 million of the total transaction value may be repaid to General Mills at the first anniversary of the closing, depending on its (20-day) average stock price at that time. Therefore, we must calculate and thus analyze the various costs and savings associated with the transaction to determine whether or not General Mills’ shareholders should vote for the proposed merger. If approved, this will be the biggest takeover in GM’s 136 years of business and General Mills will become the fifth largest food company in the world (Forster, 2002). General Mills Company Profile:
General Mills manufactures and markets branded consumer foods worldwide. It has a strong presence in the United States, as it is the nation’s largest producer of yogurt and the second largest producer of ready-to-eat cereals (generalmills.com). General Mills has successfully tapped into international markets, serving more than 100 countries around the globe. The company owns many product segments that are marketed under high-profile brand names, such as Betty Crocker, Yoplait, Cheerios, and Big G. The company has mature product lines and has pursued numerous expansion efforts that have successfully positioned General Mills as a market leader. In fact, on average, US shoppers place at least one General Mills product into their shopping cart each time they visit the grocery store (generalmills.com). Its products are manufactured in 15 countries and are available in more than 100, thus General Mills has capitalized on overseas expansion and has benefited from broad, efficient distribution channels. Its expansion efforts have proved successful, as GM had annual revenues of about $7.5 billion in the year 2000. Although highly profitable, GM is facing increased competition in the food industry, as rivals are consolidating and becoming more difficult to compete against. Therefore, GM must be able to recognize and thus act on potentially high-yielding investments that will allow the company to expand despite the slow-growth food industry. Diageo PLC/Pillsbury Company Profile:
Pillsbury is a baked goods company that operates under the parent organization, Diageo PLC. Diageo is a London-based consumer-goods conglomerate that specializes in the manufacture of premium alcoholic brands such as Smirnoff, Johnnie Walker, and Guinness. Its portfolio includes world-famous drink brands, Burger King, and Pillsbury, a producer of refrigerated dough and baked goods. Pillsbury is one of ￼2|General Mills’ Acquisition of Pillsbury
America’s best-recognized names in the food industry. Marketing its goods under the popular Dough Boy character, Pillsbury has successfully positioned its brand and has created a longstanding platform for success in the food industry. The company also controls several other high-profile brands, such as Green Giant, Old El Paso, and Progresso. Not too far behind General Mills, in 2000, Pillsbury generated annual revenues of $6.1 billion. Although Pillsbury has...
Cited: Forster, Julie. "General Malaise at General Mills." Business Week 01 Jul 2001: 1 Dec 2009. .
General Mills 2000 Annual Report General Mills 2001 Annual Report
Haeg, Andrew. "General Mills Acquires Pillsbury." MPR 17 Jul 2000: 1 Dec 2009. .
Group Meeting Times:
Our group has met literally every day since last Wednesday, December 2nd (including Saturday and Sunday). We typically met for about three hours per day. All group members were present.
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