General Mills Continues Portfolio Reshaping Strategy with Acquisition of Tyson Foods’ Pet Treats Business

Rhea-AI Summary

General Mills (NYSE: GIS) has agreed to acquire Tyson Foods’ (NYSE: TSN) pet treats business for $1.2 billion cash, effectively costing $975 million after a $225 million tax benefit. This acquisition includes brands like Nudges, Top Chews, and True Chews, and is aimed at strengthening General Mills' pet platform. The business generated over $240 million in net sales in the past year. Funding will come from cash reserves and short-term borrowings, with expected earnings benefits after the deal closes in Q1 FY 2022.

Positive

• The acquisition adds $240 million in annual net sales from the pet treats segment.
• Strategically aligns with General Mills' Accelerate strategy and enhances its pet food market position.
• Expected to be modestly accretive to earnings within the first year post-acquisition.

Negative

• The acquisition requires cash on hand and short-term borrowing, impacting liquidity.
• Potential integration challenges and risks related to achieving anticipated results.
• Regulatory approval and customary closing conditions could delay the transaction.

General Mills (NYSE: GIS) today announced that it has entered into a definitive agreement to acquire Tyson Foods’ (NYSE: TSN) pet treats business for $1.2 billion in cash in a transaction that provides an estimated tax benefit of $225 million, equating to an effective purchase price of $975 million. The business, which includes the Nudges, Top Chews and True Chews brands, is the leader in natural meat treats for pets.

“This acquisition advances our Accelerate strategy and further reshapes our portfolio for growth by adding an attractive business to our fast-growing Pet platform,” said General Mills Chairman and Chief Executive Officer Jeff Harmening. “Today’s announcement reinforces our commitment to using all capital allocation levers – including investment in the business, dividend growth, strategic acquisitions, and share repurchases – to drive top-tier shareholder returns over the long term.”

“Pet food is a high-growth category, fueled by the humanization of pets, a trend that has only increased during the pandemic,” said Bethany Quam, General Mills Group President, Pet segment. “By adding these trusted pet treat products to our portfolio, we are strengthening our position in this attractive category. This acquisition is highly complementary to our existing business, combining BLUE’s leading position in natural pet food with Nudges, Top Chews, and True Chews strong portfolio of natural meat treats for pets. We’re excited for the opportunity to provide pet parents with more ways to feed and treat their pets like family.”

Tyson Foods’ pet treats portfolio generated more than $240 million in net sales in the 12 months ended April 3, 2021. As part of the acquisition, General Mills is also acquiring a manufacturing facility in Independence, Iowa.

The company intends to fund the acquisition with cash on hand and short-term borrowing. The transaction is expected to be modestly accretive to General Mills earnings in the first 12 months following completion, excluding transaction and integration expenses. The company expects the transaction to close in the first quarter of fiscal 2022, subject to regulatory approval and other customary closing conditions.

Barclays is acting as exclusive financial advisor to General Mills and Faegre Drinker Biddle & Reath is serving as legal counsel.

About General Mills

General Mills is a leading global food company whose purpose is to make food the world loves. Its brands include Cheerios, Annie's, Yoplait, Nature Valley, Häagen-Dazs, Betty Crocker, Pillsbury, Old El Paso, Wanchai Ferry, Yoki, BLUE and more. Headquartered in Minneapolis, Minnesota, USA, General Mills generated fiscal 2020 net sales of U.S. $17.6 billion. In addition, General Mills’ share of non-consolidated joint venture net sales totaled U.S. $1.0 billion.

Note on Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. These forward-looking statements, including statements about the pending transaction and its timing, expected impact on earnings, and expected tax benefits, are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. Some of these risks and uncertainties include that conditions to closing of the transaction may not be satisfied on the expected timeline or at all; the transition and integration of the acquired business may be more difficult or costly than expected; the acquired business may not achieve expected results; and changes in tax laws may affect the availability of anticipated tax benefits. The company undertakes no obligation to publicly revise any forward-looking statement to reflect any future events or circumstances.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210514005215/en/

FAQ

What is the purpose of General Mills' acquisition of Tyson Foods' pet treats business?

The acquisition aims to strengthen General Mills' pet platform by adding leading brands in the natural meat treats category.

How much did General Mills pay for Tyson Foods' pet treats business?

General Mills agreed to acquire the business for $1.2 billion, which has an effective purchase price of $975 million after tax benefits.

When is the acquisition of Tyson Foods' pet treats business expected to close?

The transaction is anticipated to close in the first quarter of fiscal 2022, pending regulatory approval and other conditions.

What brands are included in the acquisition of Tyson Foods' pet treats business?

The acquisition includes the Nudges, Top Chews, and True Chews brands.

How will General Mills fund the acquisition of Tyson Foods' pet treats business?

General Mills plans to fund the acquisition using cash on hand and short-term borrowing.