General Mills Inc. (NYSE: GIS) announced on Friday that it has entered into an agreement to acquireBlue Buffalo Pet Products (NASDAQ: BUFF) for $40.00 per share in cash or totaling $8 billion. Blue Buffalo shares rose by 16.8 percent after the opening bell on Friday.
Blue Buffalo was founded in 2002 and offers many all natural consumable and lifestyle brand products for pets, which includes food, life protection, and veterinary diet plans under its BLUE brand. BLUE is the top wholesome natural pet food in the U.S.
The transaction will now position General Mills as a leader in the U.S. market for pet food while accelerating and reshaping its portfolio strategy.
"The addition of BLUE to our family of well-loved brands provides General Mills with the leading position in the large and growing Wholesome Natural pet food category and represents a significant milestone as we reshape our portfolio to drive additional growth and value creation for our shareholders," said General Mills Chairman and Chief Executive Officer, Jeff Harmening.
"In pet food, as in human food, consumers are seeking more natural and premium products and we have tremendous respect for how attentive Blue Buffalo has been to the needs of their consumers, pet parents and pets, as they have built their brand.” added Harmening.
In 2017, Blue Buffalo reported net sales of $1.3 billion, while delivering a compound annual net sale growth of 18 percent.
The acquisition will now put General Mills’ net debt to 4.2 times higher EBITDA. The company has halted share repurchases, but the significant growth rate it can see can potentially return more value to shareholders in the future.
Upon completion of the deal, General Mills will operate Blue Buffalo as a new pet segment along side its other operating segments. Billy Bishop will remain as Blue Buffalo’s CEO and report to Harmening.
The transaction is expected to close at the end of the 2018 fiscal year.