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General Mills (GIS) to Buy Tyson Foods' Pet Treats Business
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General Mills, Inc. (GIS - Free Report) is on track to undertake growth initiatives as part of the Accelerate strategy. Progressing along these lines, the company signed a definitive agreement with Tyson Foods, Inc. (TSN - Free Report) to acquire the latter’s pet treats business. The to-be-acquired business is well known for natural meat treats for pets and includes brands like Nudges, Top Chews and True Chews. Per the deal, General Mills will also take over Tyson Foods’ production unit located in Independence, Iowa. Management anticipates concluding the deal in the first quarter of fiscal 2022.
We note that, the deal is priced at $1.2 billion in cash, which will provide a projected tax benefit of $225 million. Incidentally, the effective purchase price is pegged at $975 million. General Mills expects to fund the buyout using cash on hand and short-term borrowing. Further, management expects the buyout to be modestly accretive to the company’s earnings in the first 12 months after the deal is concluded, excluding transaction and integration costs.
General Mills noted that the acquisition bodes well amid growing pet-food category treads stemming from humanization of pets especially in the pandemic. Certainly, the deal reshapes the company’s portfolio to add another leaf to its impressive Pet platform that includes BLUE — a leader in natural pet food.
Accelerate Strategy Aids Growth
General Mills is focused on its Accelerate strategy, which was unveiled earlier this year. The strategy is outlined to help the company make choices of how to win and where to play with an aim to boost profitability, while enhancing shareholders’ returns in the long run. As a part of the strategy General Mills is prioritizing investment, investing in five Global Platforms, driving growth in Local Gem brands and reshaping portfolio.
Notably, General Mills’ venture capital arm — 301 INC — in partnership with other investors recently unveiled plans of a multistage investment of up to $20 million in London-based food company — Pots & Co. We note that Pots & Co is popular for its assortment of hand-crafted potted desserts, which are available in U.K. supermarkets. Through this investment, Pots & Co expects to accelerate its growth strategy and expand its product range as well as distribution in the United States.
In March, the company had entered into a memorandum of understanding to offload 51% controlling interest in Yoplait S.A.S. to a renowned French dairy cooperative — Sodiaal. Management expects to conclude the deal by the end of calendar 2021. Well, General Mills anticipates the deal to enhance its growth, improve margins and boost shareholders’ value. Also, it will increase the company’s focus on the brand platforms that have more growth potential. Management also expects to witness enhanced growth in its Europe and Australia segments once the transaction is complete.
Wrapping up
Sales in General Mills’ Convenience Stores & Foodservice segment have been declining for a while now. During third-quarter fiscal 2021, revenues in the segment declined 10% year over year due to lower demand for away-from-home food amid the coronavirus outbreak. Reduced consumer traffic and other pandemic-induced restrictions have adversely impacted the segment’s major away-from-home channels like restaurants, lodging and schools. Additionally, this Zacks Rank #4 (Sell) company is seeing elevated input costs, which affected its adjusted gross margin during the quarter.
Nevertheless, we believe that the aforementioned transaction will help the company achieve its objectives in the Accelerate strategy. Notably, shares of General Mills have moved up 7.9% so far this year compared with the industry’s 10.3% growth.
Pilgrim’s Pride Corporation (PPC - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 27%.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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General Mills (GIS) to Buy Tyson Foods' Pet Treats Business
General Mills, Inc. (GIS - Free Report) is on track to undertake growth initiatives as part of the Accelerate strategy. Progressing along these lines, the company signed a definitive agreement with Tyson Foods, Inc. (TSN - Free Report) to acquire the latter’s pet treats business. The to-be-acquired business is well known for natural meat treats for pets and includes brands like Nudges, Top Chews and True Chews. Per the deal, General Mills will also take over Tyson Foods’ production unit located in Independence, Iowa. Management anticipates concluding the deal in the first quarter of fiscal 2022.
We note that, the deal is priced at $1.2 billion in cash, which will provide a projected tax benefit of $225 million. Incidentally, the effective purchase price is pegged at $975 million. General Mills expects to fund the buyout using cash on hand and short-term borrowing. Further, management expects the buyout to be modestly accretive to the company’s earnings in the first 12 months after the deal is concluded, excluding transaction and integration costs.
General Mills noted that the acquisition bodes well amid growing pet-food category treads stemming from humanization of pets especially in the pandemic. Certainly, the deal reshapes the company’s portfolio to add another leaf to its impressive Pet platform that includes BLUE — a leader in natural pet food.
Accelerate Strategy Aids Growth
General Mills is focused on its Accelerate strategy, which was unveiled earlier this year. The strategy is outlined to help the company make choices of how to win and where to play with an aim to boost profitability, while enhancing shareholders’ returns in the long run. As a part of the strategy General Mills is prioritizing investment, investing in five Global Platforms, driving growth in Local Gem brands and reshaping portfolio.
Notably, General Mills’ venture capital arm — 301 INC — in partnership with other investors recently unveiled plans of a multistage investment of up to $20 million in London-based food company — Pots & Co. We note that Pots & Co is popular for its assortment of hand-crafted potted desserts, which are available in U.K. supermarkets. Through this investment, Pots & Co expects to accelerate its growth strategy and expand its product range as well as distribution in the United States.
In March, the company had entered into a memorandum of understanding to offload 51% controlling interest in Yoplait S.A.S. to a renowned French dairy cooperative — Sodiaal. Management expects to conclude the deal by the end of calendar 2021. Well, General Mills anticipates the deal to enhance its growth, improve margins and boost shareholders’ value. Also, it will increase the company’s focus on the brand platforms that have more growth potential. Management also expects to witness enhanced growth in its Europe and Australia segments once the transaction is complete.
Wrapping up
Sales in General Mills’ Convenience Stores & Foodservice segment have been declining for a while now. During third-quarter fiscal 2021, revenues in the segment declined 10% year over year due to lower demand for away-from-home food amid the coronavirus outbreak. Reduced consumer traffic and other pandemic-induced restrictions have adversely impacted the segment’s major away-from-home channels like restaurants, lodging and schools. Additionally, this Zacks Rank #4 (Sell) company is seeing elevated input costs, which affected its adjusted gross margin during the quarter.
Nevertheless, we believe that the aforementioned transaction will help the company achieve its objectives in the Accelerate strategy. Notably, shares of General Mills have moved up 7.9% so far this year compared with the industry’s 10.3% growth.
Some Solid Food Bets
Medifast, Inc. (MED - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pilgrim’s Pride Corporation (PPC - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 27%.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>