General Mils completes purchase of Pillsbury

by Emily Wilson
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General Mills, Inc. completed the acquisition of The Pillsbury Co. on Oct. 31 on slightly revised terms, some viewed favorable to General Mills, Inc. and others to the seller, Diageo P.L.C.

The final stock and cash transaction was valued at U.S.$10.4 billion. Under the revised agreement, General Mills issued fewer shares to Diageo because of appreciation in the company’s share price. General Mills also assumed $4.5 billion in debt, compared with $5.14 billion originally. The new agreement also gave Diageo an option to sell part of its stake in General Mills and reduced Diageo’s tax liability on the sale of Pillsbury.

In the transaction, Diageo received 134 million shares of General Mills common stock, valued at $44 per share, or $5.9 billion. The original agreement called for 141 million shares, when General Mills stock was valued at about $38 per share.

On Nov. 1, Diageo exercised its option to sell back 55 million shares to General Mills at a price of $42.14 per share. That represented 41% of the total shares it had received from General Mills and reduced its stake in the company from 32% to 18%.

As long as Diageo retains at least 50% of the General Mills shares it received in the transaction, it may designate two individuals to the General Mills board of directors. Diageo last week said it would designate Paul Walsh, its chief executive officer, and John Keenan, former deputy c.e.o. of its Guinness United Distillers & Vintners unit, as members of the General Mills board.