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General Mills Eyes Yogurt Biz

GIS K

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General Mills Inc. (GIS - Analyst Report) announced that it has inked a deal of $1.5 million with equity firm PAI Partners and French dairy cooperative Sodiaal to acquire 51% of Yoplait S.A.S. and 50% of a related entity that holds the Yoplait brands worldwide.

The transaction awaits regulatory approval and is expected to close in the first quarter of General Mills’ 2012 fiscal year, which begins on May 30. The business will be run by a supervisory board with representation from both General Mills and Sodiaal, which will hold the remaining of Yoplait with General Mills.

Boulogne-Billancourt, France-based Yoplait is the second-largest yogurt maker after Danone SA. It employs 1,900 employees and generated revenue of about $1.03 billion for the fiscal year ended June 30, 2010.

The Minneapolis, Minnesota-based retail giant General Mills had to fight a tough battle with Switzerland's Nestle and China's Bright Food Group who were also in the race.

While China's Bright Dairy & Food Co reportedly made the highest offer for Yoplait, it was unable to get final approval from the Chinese authorities.

The acquisition comes at a time when General Mills is in jeopardy and about to lose its license for the Yoplait brand. It has operated Yoplait’s U.S. franchise since 1977, but was about to lose it in 2012 due to the lapse of the contract. Completion of the deal with Sodiaal will also mark the end of an ongoing arbitration dispute in the United States.

General Mills also acquired natural yogurt brand Mountain High in November, 2010 that helped the company to double the size of its major yogurt business.

General Mills is a leading global manufacturer of consumer products and possesses a formidable portfolio of well-established brands. The company reported results for the second quarter of fiscal 2011 on December 16, 2010. For the quarter, adjusted earnings decreased 1.3% to $0.76 a share from the year ago period. Total revenue for the reported quarter grew only marginally by 1% year over year to $4.07 billion.

General Mills, which faces stiff competition from Kellogg Company (K - Analyst Report) and Seneca Foods Corp. currently holds a Zacks #3 Rank. On a long-term basis, the company retains a Neutral rating on the stock, with a short-term Hold rating.

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