USA – General Mills, a prominent player in the U.S. food industry, is gearing up for a significant acquisition as it transitions away from its yoghurt segment.
The company’s Chairman and CEO, Jeff Harmening, announced plans to allocate between US$1 billion and US$2 billion for this strategic move.
This decision follows General Mills’ recent sale of its North American yogurt business to Lactalis and Sodiaal, which is expected to generate approximately US$2.1 billion.
During a recent earnings call on September 18, 2024, Harmening expressed optimism about the company’s financial position, stating, “Our balance sheet is in a great place.”
He indicated that the funds from the yogurt divestiture would enhance General Mills’ growth profile through mergers and acquisitions (M&A).
While he did not disclose specific targets, he emphasized that any potential acquisition would likely align with the company’s existing categories, particularly in areas where they have a competitive advantage.
Harmening reflected on past acquisition experiences, noting that previous deals for Annie’s and Tyson Foods’ pet-treats businesses were in the range of US$820 million and US$1.2 billion respectively.
He clarified that the current M&A strategy would not reach the scale of the US$8 billion spent on Blue Buffalo in 2018.
“We didn’t find any acquisition candidates that we really liked last year,” he said, explaining why the company returned cash to shareholders instead.
This year marks a shift in strategy as Harmening indicated a renewed focus on potential acquisitions.
He stated, “It seems like our focus right now… is probably more availability of smaller-size assets that we could bolt-on that would enhance our growth.”
He underscored the importance of flexibility in their approach: “Certainly, if something bigger came along that we don’t see now, we could entertain the notion.”
The CEO elaborated on the criteria for potential acquisitions, emphasizing that they would seek opportunities that complement their existing product lines and categories where they can excel.
“You look at what we’ve done in acquisitions in pet or snacking… I would expect more of those,” he explained.
In terms of financial performance, General Mills reported mixed results for the first quarter of fiscal 2025.
While net sales remained relatively stable at US$4.8 billion, both reported and organic net sales declined by 1%.
Operating profit fell by 11% to US$832 million, while net profit decreased by 14% to US$580 million.
Despite these challenges, Harmening maintained an optimistic outlook for the remainder of the year, stating, “We have more work to do to achieve our goals… I think the theme of the day is probably progress.”
As General Mills embarks on this new chapter following its exit from yogurt production, it aims to leverage its financial resources for strategic acquisitions that will bolster its market position.
Harmening’s comments reflect a clear intention to adapt and grow within a competitive landscape while ensuring returns for shareholders remain a priority.
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