NEW YORK (AP) — The maker of Cheerios also wants to fill dog bowls.
General Mills announced its intention Friday to buy high-end pet food maker Blue Buffalo for $8 billion. It’s a return to pet business for the 150-year-old company, which used to sell food for cats, dogs and birds back in the 1950s.
Blue Buffalo Pet Products Inc. had nearly $1.3 billion in net sales last year and Minneapolis-based General Mills sees consistent growth of between 3 percent and 4 percent in the $30 billion pet food market.
“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 Chairman and CEO Jeff Harmening in a company release Friday.
General Mills has suffered three consecutive years of declining revenue as it follows customers seeking more fresh food on the dinner table.
As it transitions to accommodate changing tastes, General Mills said the Blue Buffalo acquisition will become accretive by fiscal 2020.
General Mills Inc. will pay $40 per Blue Buffalo share. That’s a 17 percent premium to the pet food company’s Thursday closing price of $34.12.
Shares of Blue Buffalo surged more than 16 percent to $39.82 Friday morning. General Mills Inc. shares fell 5 percent to $52.08
Once the deal closes, Blue Buffalo will be run as a new pet operating segment, General Mills said, and it will continue to operate out of its Wilton, Connecticut headquarters.
The acquisition is targeted to close by the end of General Mills’ fiscal year 2018.