General Mills to buy pet food maker Blue Buffalo for $8 billion
24 February 2018
US cereal foods company General Mills Inc will buy Blue Buffalo Pet Products Inc for nearly $8 billion as it looks to tap the growing pet foods market to offset falling sales for branded processed food items.
Under the acquisition announced on Friday, General Mills will pay $40 per Blue Buffalo share, representing a premium of 17.2 per cent to the pet food company's Thursday closing price.
Blue Buffalo shares were trading higher at $40.15 before the bell.
General Mills is the latest pet food acquisition by a major food company seeking to expand in a fast growing area such as pet- and organic-food amid falling demand for established brands.
Nestle, Mars and Cargill have all made bets on the pet care industries. Mars, the world's biggest pet food maker, bought animal healthcare provider VCA for $7.7 billion last year.
Founded in 2002, Blue Buffalo sells 'Blue' brand of dog and cat food made with whole meats, fruits and vegetables and rakes in more than $1 billion in yearly sales.
Minneapolis-based General Mills sells food brands like `Yoplait' yogurt, 'Nature Valley' snack bars and 'Chex' cereal. The company has seen a dent in sales over the past two years as consumers chase items viewed as healthier. It expects Blue Buffalo to help boost sales and profit margins in the next two years.
While US retail pet food sales rose 3.7 per cent last year, overall packaged food sales climbed 1.2 per cent, according to research firm Euromonitor.
''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,'' General Mills chief executive officer Jeff Harmening said in a statement.
General Mills said the deal would make it the leader in the US wholesome natural pet food industry.
Goldman Sachs acted as financial adviser to General Mills, while JPMorgan and Centerview Partners was adviser to Blue Buffalo.
Cleary Gottlieb Steen & Hamilton LLP was legal counsel to General Mills while Simpson Thacher & Bartlett LLP advised Blue Buffalo.