Diageo sells 55 million shares back to General Mills
Ann Merrill
Star Tribune
Published Nov 2 2001
The day after acquiring a 32 percent stake in General Mills,
Diageo Plc on Thursday sold 55 million shares back to the
company for $2.3 billion, cutting its holdings to 21 percent.
London-based Diageo had included the option of selling the
shares in the terms of the $10.4 billion sale of its
Minneapolis-based Pillsbury unit to General Mills. That deal,
which makes General Mills' the nation's third-largest food
company, closed late Wednesday.
Paul Walsh, Diageo's chief executive, said in a phone interview
from London on Thursday that the move reflects Diageo
shareholders' desire to convert some of their holdings to cash.
Diageo, which will keep 79 million General Mills shares, is
required under terms of the deal to divest all of its shares within
10 years but has no plans to dump the stock rapidly, Walsh said.
The shares were sold at a price of $42.14. That represents a 6
percent discount to the closing price last Friday, when the deal
was struck, and a 10 percent discount to Thursday's closing
price of $47, up $1.08 on the day.
For General Mills, the buyback means fewer outstanding
shares. And while it's taking on additional debt to buy the
shares, interest rates are low.
Changes in the financial terms of the deal -- announced
Wednesday at the closing -- were not surprising, said George
Dahlman, analyst at U.S. Bancorp Piper Jaffray in
Minneapolis.
The purchase, first announced in July 2000, took more than a
year to finalize. During that time, General Mills' stock rose,
increasing the value of the 141 million shares it planned to
issue to seller Diageo by nearly $1 billion. At the same time,
antitrust regulators were forcing General Mills to share the
Doughboy (through licensing agreements with International
Multifoods Corp.), an icon highly valued by General Mills.
Including the $2.3 billion that General Mills is spending to buy
back the 55 million shares, the company is adding about $6.15
billion in debt as a result of the acquisition. It had about $3.4
billion in debt as of August.
-- Ann Merrill is at amerrill@startribune.com .
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