General Mills has announced an agreement to acquire Blue Buffalo pet food company. Blue Buffalo makes natural pet food the company calls “super-premium pet food using only the finest natural ingredients starting with real chicken, lamb or fish.” The American market for pet food has been strong, with Blue Buffalo delivering “compound annual net sales growth of 12 percent,” over the last three years, according to Bloomberg’s Eric Pfanner. He continues:
The buzz around the pet-food sector means another suitor may emerge for Blue Buffalo, said Pablo Zuanic, an analyst at Susquehanna International Group.
“We think there is potential for counterbids,” he said in a research note. J.M. Smucker Co. wants to beef up its pet-food presence and the sector is a priority for Nestle, he said.
General Mills, based in Minneapolis, will finance the deal with debt, cash on hand and about $1 billion in equity. The price represents a 23 percent premium to Blue Buffalo’s 60-day volume-weighted average price. The deal has been approved by both companies’ boards but needs to be cleared by regulators.
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