“We will continue to look for options to strengthen our growth profile through [mergers and acquisitions], with our near-terms focus on bolt-on acquisitions, with the most likely transaction size ranging up to $1 to $2 billion dollars, which would be more similar to our Annie’s or Tyson pet treats acquisitions, as opposed to Blue Buffalo,” which was a larger transaction, CEO Jeff Harmening told analysts during the company’s first quarter fiscal 2025 earnings call yesterday.
“Certainly, if something bigger came along that we do not see now, we could entertain the notion. But for us, it seems like our focus right now and what we see in the marketplace really is probably more availability of smaller-sized assets that we could bolt on that would enhance our growth,” he added.
Acquisition interest follows proposed sale of North American yogurt business
General Mill’s renewed interest in potential acquisitions comes as it continues to aggressively reshape its portfolio, including last week’s announcement that it intends to divest its US yogurt business to Lactalis and its Canadian yogurt business to Sodiaal, respectively, for a combined $2.1 billion in cash.
The North American yogurt business generated about $1.5 billion dollars in net sales in fiscal 2024 and had a margin structure that Harmening characterized as “meaningfully below the company average.”
He explained, “Because of the drag that yogurt has been on our net sales and profitability over time, this deal enhances the underlying growth profile and margin structure of our remaining portfolio. In addition, it allows us to sharpen our focus on our global platforms and local gem brands where we have better opportunities to drive profitable growth.”
General Mills continues to reshape its portfolio
Including these transactions, which the company expects to close in calendar year 2025 pending customary closing conditions, Harmening said, General Mills will have turned over nearly 30% of its net sales base since fiscal 2018. Other divestments include its European dough business and large parts of its main meal and side dish businesses in the US.
General Mills complemented these sales with acquisitions in the fast-growing premium pet foods category and in the away-from-home category.
Between the pending divestment of the yogurt business and other recent strategic sales, Harmening said General Mills’ balance sheet “is in a great place,” and he said he felt it “important to make sure that all of our investors know what we intend to do with those proceeds” with regards to potential bolt-on acquisitions.
Potential share repurchases still in the mix
Of course, he added, if General Mills does not find acquisitions that meet its criteria and fit its long-term goals, it will return excess cash to shareholders in the form of share repurchases as it did during fiscal 2024, when it also was on the look out for, but did not find, potential acquisitions.
Even if General Mills identifies potential acquisitions, it may still repurchase shares at the same time, as it did when it acquired Annie’s, Harmening said.
“We have the balance sheet to be able to do both of those things at the same time – add on bolt-on acquisitions … as well as repurchase shares,” he said.