General Mills-Pillsbury merger moves ahead after FTC deadlocks on vote

Wednesday, October 24th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ General Mills' purchase of Pillsbury Co. brings together two 19th century Minneapolis milling companies that will complement each other nicely in the 21st century, business analysts say.

The merger won governmental approval Tuesday when the Federal Trade Commission deadlocked 2-2 on the deal. Without a majority vote against the merger, the deal goes through.

``This brings together some really historic brands _ General Mills' expertise is in dry foods, while Pillsbury's expertise is in refrigerated goods,'' said John M. McMillin, a food analyst for Prudential Securities in New York. ``This allows them to build a more complete packaged-food company.''

Pillsbury is the No. 1 producer of refrigerated doughs in the United States. It also makes Green Giant vegetables, Haagen-Dazs ice cream, Old El Paso Mexican foods and Progresso soups.

General Mills is the nation's No. 1 cereal maker, including Cheerios, Lucky Charms, Trix and Wheaties. It also makes Yoplait and Columbo yogurt, Betty Crocker dessert mixes, Hamburger Helper, Bisquik and snacks such as Chex Mix and Pop Secret popcorn.

The new company, with combined annual sales of around $13 billion, will be able to compete more effectively, McMillin said.

``There's an attempt to get bigger, but there's a greater attempt to get better,'' he said.

Leonard Teitlebaum, a food analyst with Merrill Lynch & Co. in New York, agreed.

``The Pillsbury brands really take General Mills into other areas of the grocery store,'' he said. ``General Mills is a renowned marketing company, arguably the best in the food business.''

The FTC had only four members voting on the $6.1 billion purchase. The commission's chairman, Republican Timothy Muris, recused himself because he recently worked for a law firm that represented General Mills.

The FTC split on party lines, with Democrats Sheila Anthony and Mozelle Thompson voting against the merger, and Republicans Orson Swindle and Thomas Leary voting for it.

The purchase of Pillsbury from Diageo PLC, a London-based food and drinks conglomerate, creates the world's fifth-largest packaged food company. Under the deal, General Mills will assume $5.3 billion in debt.

To alleviate antitrust issues, General Mills announced in February that it would sell Pillsbury dessert mixes, Hungry Jack potato mixes and General Mills' U.S. Robin Hood flour business to International Multifoods Corp. for $305 million once it purchased Pillsbury.

The deal had been hung up on General Mills' plan to retain the trademark on the cuddly, ticklish Pillsbury Doughboy _ and license the trademark rights to International Multifoods.

Anthony and Thompson, the two Democrats who voted against the merger, said this split trademark would lead to confusion for consumers. The Republicans on the commission, Swindle and Leary, said the arrangement was workable.

Under the deal, General Mills would nearly double its annual sales to about $13 billion, but still would be dwarfed by Nestle SA, which at $50 billion is the packaged food industry's largest company.

Shares of General Mills closed Tuesday up 5 cents to $43.20 in trading on the New York Stock Exchange. U.S. shares of Diageo fell $1 to $39.20 in trading on the New York Stock Exchange.

The two companies issued a joint statement Thursday saying they were pleased with the FTC decision.

General Mills and Pillsbury both started in the flour-milling business in Minneapolis in the 1860s. Pillsbury now employs around 20,000 people; General Mills about 11,000. Job losses are likely because both still maintain headquarters in the Twin Cities area.