General Mills’ Acquisition of Pillsbury from Diageo Plc
General Mills’ Acquisition of Pillsbury from Diageo PLC
Lauren Sherlock Jason Park
JP Zendman
12/9/2009

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
Lauren Sherlock Jason Park
JP Zendman
12/9/2009

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
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. 16 | G e n e r a l M i l l s ’ A c q u i s i t i o n o f P i l l s b u r y Appendix A 17 | G e n e r a l M i l l s ’ A c q u i s i t i o n o f P i l l s b u r y