General Mills open to acquisitions in the near future

MINNEAPOLIS — Less than a week after announcing the sale of its North American yogurt business for $2.1 billion, General Mills Inc. Chairman and CEO Jeffrey Harmening said the company is open to potential acquisitions.

“We will continue to seek options to enhance our growth profile through M&A, with a near-term focus on additional acquisitions, with the most likely deal size being in the $1 billion to $2 billion range, which would be more similar to our acquisitions of Annie’s or Tyson Pet Treats, as opposed to Blue Buffalo,” Harmening said in General Mills’ first-quarter fiscal 2025 earnings report.

As part of the yogurt sale, announced Sept. 12, Minneapolis-based General Mills agreed to sell its Yoplait, Liberté, Go-Gurt, Oui, Mountain High and :ratio brands in the United States and Canada to French companies Lactalis Group and Sodiaal, respectively. The deals — which include manufacturing facilities in Murfreesboro, Tennessee; Reed City, Michigan; and Saint-Hyacinthe, Quebec — are expected to close in calendar 2025.

In announcing the yogurt sale, General Mills said it expected to use the net proceeds to buy back stock. But Harmening noted the funds could also be used for acquisitions.

“If we do not find attractive acquisition candidates, we plan to return excess cash to shareholders in the form of a share buyback,” he said.

During a first-quarter conference call on Sept. 18, Harmening told analysts that General Mills was taking the same approach for fiscal 2024.

“Last fiscal year, we did exactly what I said we did, which was we didn’t find any acquisition candidates that we really liked, so we returned money to shareholders in the form of stock purchases,” he said. “As far as this year goes, our balance sheet is in a great place. And with this sale of our (North) American yogurt businesses, we felt it was important to make sure that all of our investors knew what we were going to do with those proceeds. As we look at the environment, I was a little more specific in that (earnings) announcement, and really that’s what we see in the near future as the types of things that could be available to us in terms of add-ons, similar to what we did for Annie’s or Tyson.”

General Mills’ recent acquisitions have focused on the pet food category and include Edgard & Cooper (European pet food) in April of this year (financial terms undisclosed), Fera Pets (pet supplements) in January 2024 (terms undisclosed), Tyson Foods’ pet treats business for $1.2 billion — comprising the Nudges, Top Chews and True Chews brands — in July 2021 and Blue Buffalo Pet Products for $8 billion in April 2018.

On the food side, General Mills acquired TNT Crust (frozen pizza crust) in June 2022 (terms not disclosed) and Annie’s (natural and organic foods) in October 2014 for $820 million.

“Obviously, if something bigger came along that we don’t see now, we could look at that idea,” Harmening told analysts of acquisition opportunities that could come up in the near future. “But for us, it seems like right now our focus is on what we see in the market, probably more availability of smaller assets that we could throw in that would increase our growth — so we’re still adding to our growth, but we’re adding to businesses that we already own.”

He declined to provide analysts with more details about potential takeover candidates, but acknowledged that a possible transaction could be domestic or international.

“I won’t get into those details, but really where we have competitive advantages, where we see growth, maybe there are little synergies along the way, those are the areas we’ll continue to look for,” Harmening said.

TD Cowen analyst Robert Moskow referenced General Mills’ takeover talks in a Sept. 19 research note on the food company’s first-quarter results.

“Management emphasized that it could use the proceeds from the yogurt sale to repurchase stock and make an acquisition at the same time,” Moskow said. “They reaffirmed their near-term focus on bundled acquisition targets in the $1 billion to $2 billion range, as opposed to a larger transaction. They will continue to look for transactions that will drive growth in existing categories where they have competitive advantages, particularly pet products, snacks or foodservice.”

Once the yogurt deals are complete, General Mills said the company will have nearly 30% of its net sales from fiscal 2018. In addition to the pet and food acquisitions, that includes the divestiture of its Hamburger Helper and Sometimes Salad Side dishes businesses to Eagle Family Foods Group for $610 million in July 2022 and the sale of its European pastry businesses Knack & Back and Jus-Rol to Cerelia Group in November 2021.

“Overall, this work has increased our portfolio’s underlying growth exposure by more than one percentage point,” Harmening said.