- General Mills (NYSE:GIS) lists the strategic reasons for its $8B acquisition of Blue Buffalo Pet Products (NASDAQ:BUFF).
- "The $30 billion U.S. pet food market is generating consistent 3-4% growth and is highly attractive for retailers based on continued market growth, premiumization and subscription-like purchase patterns that drive traffic and repeat purchases."
- "BLUE has one of the strongest brand equities in the pet food market and is the #1 brand in the Wholesome Natural category with retail sales of four-times the next largest Wholesome Natural pet food brand."
- "BLUE is the #1 pet food brand in the pet specialty channel at approximately twice the size of the next largest brand. BLUE is also the #1 pet food brand in the rapidly growing E-Commerce channel, where Blue Buffalo generated over $250 million of net revenues in 2017 growing over 75% versus prior year."
- "BLUE has generated early success in the food, drug and mass channel which, in conjunction with General Mills' capabilities, represents a significant growth opportunity through strengthening BLUE's distribution."
- On the financial end of the deal, General Mills says its pro forma net debt-to-EBITDA ratio is expected to be approximately 4.2X. General Mills maintains that it's committed to maintaining an investment grade rating and expects to deleverage to approximately 3.5xXby the end of fiscal 2020. General Mills also expects to maintain its $0.49/share quarterly dividend and suspend its current share repurchase program while it prioritizes achieving its leverage target.
- GIS -0.36% to $54.75 premarket. BUFF +17.29% to $40.02.
- Previously: General Mills to buy Blue Buffalo for $8B (Feb. 23)
- Now read: General Mills: A Reliable Dividend Machine
Original article