MINNEAPOLIS - General Mills , Inc. (NYSE: NYSE:GIS) has entered into agreements to divest its North American Yogurt business to French dairy companies Lactalis and Sodiaal for $2.1 billion USD in separate cash transactions. Lactalis will acquire the U.S. operations, while Sodiaal will take over the Canadian segment. The deal, which includes popular brands like Yoplait and Go-Gurt, is part of the company's strategic reshaping and is expected to close in 2025, pending regulatory approval.
The yogurt business, which includes manufacturing facilities in Tennessee, Michigan, and Québec, contributed about $1.5 billion to General Mills' fiscal 2024 net sales. The company's Chairman and CEO, Jeff Harmening, emphasized that the sale is a significant move in advancing their Accelerate strategy, which focuses on brands with stronger growth prospects. He also acknowledged the contributions of the North American Yogurt team members and expressed confidence in the new owners' ability to drive future growth.
The transactions are projected to be 3 percent dilutive to General Mills' adjusted earnings per share in the first 12 months post-closure, excluding one-time impacts and transaction costs. The proceeds from the sale are intended for share repurchases. General Mills will discuss the transactions' financial implications further during its first-quarter results announcement on September 18, 2024.
J.P. Morgan acted as General Mills' exclusive financial adviser, with Cleary Gottlieb Steen & Hamilton LLP serving as legal adviser for the transactions. This sale reflects the company's ongoing efforts to optimize its portfolio and focus on areas with the most potential for shareholder returns. The information in this article is based on a press release statement from General Mills.
In other recent news, General Mills is reportedly in discussions to divest its yogurt operations in the United States and Canada to French dairy companies Groupe Lactalis and Sodiaal. This follows an earlier report in April suggesting the company was considering offloading its North American yogurt business. On the financial front, General Mills has confirmed its financial targets for fiscal year 2025, expecting organic net sales to be flat to up 1 percent, and an adjusted operating profit ranging from a 2 percent decline to flat in constant currency.
Turning to analyst evaluations, Deutsche Bank (ETR:DBKGn) raised its price target for General Mills to $70, maintaining a Hold rating. Similarly, Jefferies increased its price target for the company from $66.00 to $69.00, also maintaining a Hold rating. However, Argus downgraded General Mills' stock from Buy to Hold due to ongoing volume weaknesses and inflationary pressures.
In a noteworthy executive move, General Mills appointed Asheesh Saksena as Chief Strategy & Growth Officer, who brings previous experience from Gap, Inc. (NYSE:GAP) and Best Buy (NYSE:BBY). The company is also considering potential mergers and acquisitions in the $1 billion to $1.5 billion range as part of its capital allocation priorities. These are recent developments that investors should be aware of.
InvestingPro Insights
As General Mills, Inc. (NYSE: GIS) moves forward with the divestiture of its North American Yogurt business, InvestingPro data reveals a company with a solid financial foundation and a commitment to shareholder value. With a market capitalization of $40.7 billion USD and a P/E ratio that has adjusted from 16.79 to a more favorable 15.04 in the last twelve months as of Q4 2024, General Mills appears to be in a strong position to execute its strategic initiatives.
InvestingPro Tips highlight management's active share buyback strategy and a commendable track record of raising its dividend for 4 consecutive years, with dividend payments being maintained for an impressive 54 years in a row. This consistent return to shareholders aligns with the company's plans to utilize the proceeds from the yogurt business sale for further share repurchases. Additionally, the company's profitability over the last twelve months reinforces the positive outlook, with analysts predicting continued profitability this year.
Key InvestingPro Data metrics also shed light on the company's performance and future potential:
- The gross profit margin stands at a healthy 35.01%, indicating efficient cost management.
- An operating income margin of 18.98% reflects a strong operational performance.
- The EBITDA growth of 16.99% in the last twelve months suggests an improving earnings potential.
Investors looking for more in-depth analysis and additional InvestingPro Tips can find them at https://www.investing.com/pro/GIS, where 6 more tips are available to provide a comprehensive investment picture of General Mills.
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