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General Mills Buys Blue Buffalo


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Carrie Brenner/PPN LLC at Anaheim Feed and Pet Supply

Minneapolis-based General Mills and Wilton, Conn.-based Blue Buffalo Pet Products today announced that they have entered into a definitive agreement under which General Mills will acquire Blue Buffalo for $40 per share in cash, representing an enterprise value of approximately $8 billion. The transaction 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, according to the company.

“The addition of Blue to our family of well-loved brands provides General Mills with the leading position in the large and growing wholesome natural pet food category and represents a significant milestone as we reshape our portfolio to drive additional growth and value creation for our shareholders,” said Jeff Harmening, General Mills’ chairman and CEO. 

“In pet food, as in human food, consumers are seeking more natural and premium products, and we have tremendous respect for how attentive Blue Buffalo has been to the needs of their consumers, pet parents and pets as they have built their brand,” Harmening added. “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 and marketing resources. We will, in turn, benefit from their experience building one of the strongest pull brands in the CPG world.”

“I have been impressed by General Mills’ strong track record of accelerating growth for its natural and organic brands, while giving them the freedom to maintain their own unique culture and identity,” said Billy Bishop, Blue Buffalo’s CEO. “General Mills will be a tremendous home for our Blue brand as our talented team of over 1,700 ‘Buffs’ joins this new extended family. From the first meeting Jeff and I had, I felt a strong cultural fit between our two companies and believe they will be a great partner in our mission to reach more pet parents and feed more pets.”

Founded in 2002, Blue Buffalo is the fastest-growing major pet food company making natural foods and treats for dogs and cats under the Blue brand, which includes Blue Life Protection Formula, Blue Wilderness, Blue Basics, Blue Freedom and Blue Natural Veterinary Diet, company officials stated. Blue is the No. 1 wholesome natural pet food brand in the U.S., with $1.275 billion in net sales and $319 million in adjusted EBITDA for fiscal year 2017, representing an adjusted EBITDA margin of 25 percent. Over the past three years, Blue Buffalo has delivered compound annual net sales growth of 12 percent and adjusted EBITDA growth of 18 percent, officials added.

General Mills reported that with its scale and experience, it will support greater effectiveness and efficiency for Blue Buffalo across key business areas, including sales, marketing, advertising, supply chain, research and development, innovation and environmental stewardship. These capabilities are expected to contribute to meaningful revenue synergies over time, in addition to $50 million in anticipated cost-savings opportunities.

General Mills is the third-largest natural and organic food producer in the U.S., the company stated. Upon completion of the transaction, General Mills will operate Blue Buffalo as a new pet operating segment alongside its four current operating segments: North American retail, convenience stores and foodservice, Europe and Australia, and Asia and Latin America. General Mills expects to maintain Blue Buffalo’s Wilton, Conn., headquarters and its Joplin, Mo., and Richmond, Ind., manufacturing and research and development facilities. Bishop will continue to lead the business and will report to Harmening.

The all-cash purchase price of $40 per share represents a 23 percent premium to Blue Buffalo’s 60-day volume weighted average price (VWAP), and a 2017 adjusted EBITDA multiple of approximately 22x, including synergies (includes anticipated $50 million cost synergies). General Mills expects to finance the transaction with a combination of debt, cash on hand and approximately $1 billion in equity, company officials stated.

The transaction, which has been approved by the boards of directors of General Mills and Blue Buffalo, is subject to regulatory approvals and other customary closing conditions, and it is expected to close by the end of General Mills’ fiscal 2018. 

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