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General Mills reshapes its portfolio with pet food acquisition

In the second-largest pet food deal ever, General Mills announced that it will buy Blue Buffalo Pet Products in an $8 billion deal. This acquisition, expected to be completed in May, will make the Midwestern company the leader in the U.S. natural pet food category.

As part of its portfolio reshaping and to counter a market of stagnant sales of cereal and yogurt, General Mills is jumping into an industry whose growth has outpaced packaged food sales -- 3.7 percent to 1.2 percent -- respectively, according to Euromonitor, and which is generating consistent 3 to 4 percent growth.

General Mills is the third-largest natural and organic food producer in the U.S. with leading brands including Annie's, Lärabar, Liberté, Cascadian Farm, Muir Glen, and EPIC. With the purchase of Blue Buffalo, the company will create a new pet operating segment alongside its four current segments, which include North American Retail, Convenience Stores & Foodservice, Europe & Australia, and Asia & Latin America.

Blue Buffalo, based in Wilton, Connecticut, and established in 2002, is the nation’s leading natural pet food company with a reported $1.3 billion in net sales in its last fiscal year, according to The Wall Street Journal. General Mills has said it will maintain the Connecticut headquarters, and the company’s Missouri and Indiana manufacturing and R&D facilities. Additionally, current Blue Buffalo CEO Billy Bishop will continue to lead the business.

"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 CEO Jeff Harmening, in a press release.

General Mills isn’t the first large packaged goods company to seek diversification in the $30 billion U.S. pet food market: Nestlé has Purina PetCare, which was formed in 2001 by combining Ralston Purina, which was acquired by Nestlé for $10.3 billion, with Nestlé's Friskies Petcare Company; Mars Inc. bought VCA Inc. – a veterinary and dog care firm – for $9.1 billion in September 2017; and in a $5.8 billion deal in 2015, Smucker acquired Big Heart Pet Brands.

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