General Mills Buying Blue Buffalo

Feb. 23, 2018
Last of the big pet food brands acquired; helps reshape General Mills' portfolio.

General Mills is the latest mainstream food company to get into pet foods, today (Feb. 23) announcing it will buy Blue Buffalo Pet Products Inc. for $8 billion. The buyer claims it "establishes General Mills as the leader in the U.S. wholesome natural pet food category, the fastest growing portion of the overall pet food market, and accelerates its portfolio reshaping strategy."

The same day, Blue Buffalo, which began in Wilton, Conn., in 2002 and went (semi)public in 2015, reported 2017 sales of $1.275 billion and net income of $194 million. It predicts 2018 sales to exceed $1.4 billion.

"Over the past three years, Blue Buffalo has delivered compound annual net sales growth of 12 percent and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] growth of 18 percent," General Mills said.

Blue Buffalo is the fifth-largest American pet food company, and all four companies above it are owned by huge CPG corporations. In order, they are:

1. Mars Petcare (including brands Pedigree, Royal Canin, Whiskas, Eukanuba, Iams, Nutro)

2. Nestle Purina PetCare (Purina, Alpo, Friskies)

3. Hill’s Pet Nutrition (owned by Colgate-Palmolive Co.)

4. Big Heart Pet Brands (Milk Bone, Gravy Train, 9 Lives, owned by J.M. Smucker Co.)

"As we have done with Annie's, Lärabar and Epic, we expect to help Blue Buffalo by leveraging our extensive supply chain, R&D and sales & marketing resources," said Jeff Harmening, General Mills' chairman and CEO. "We will in turn benefit from their experience building one of the strongest pull brands in the CPG world."

According to the Wall Street Journal, Billy Bishop, Blue Buffalo's CEO, will stay on.

The all-cash purchase price of $40 per share represents a 23 percent premium to Blue Buffalo's 60-day volume weighted average price. General Mills expects to finance the transaction with a combination of debt, cash on hand and approximately $1 billion in equity.

The transaction, expected to close by the end of May, already has been approved by the boards of directors of General Mills and Blue Buffalo. Invus LP and founding Bishop family shareholders, representing more than 50 percent of Blue Buffalo's outstanding shares, have approved the transaction, so no other approval of Blue Buffalo's shareholders is required to complete the transaction.

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