General Mills confirms deal to buy 50% of Yoplait for $1.1B

Confirming it intends to buy 50 percent of yogurt maker Yoplait, General Mills Inc. said Friday that the deal will give it global access to a famous brand with a lot of potential for sales growth.

PAI Partners, the French private equity firm that is selling its Yoplait stake, indicated the sale price would be $1.1 billion, half of Yoplait's total value. The other half of Yoplait, the world's second leading yogurt company, will continue to be owned by the French dairy cooperative Sodiaal.

Golden Valley-based General Mills has held the U.S. marketing license for Yoplait products since 1977. Under the new ownership arrangement, General Mills would try to expand Yoplait's market share in western Europe and extend its reach in China, India and other emerging markets.

Analysts said General Mills appeared to be buying the 50 percent stake partly to ensure that it retains U.S. marketing rights to Yoplait. The company has been in a dispute with Sodiaal over licensing fees. But General Mills spokesman Tom Forsythe said Friday that the company's motives are offensive, not defensive.

"Our rationale is entirely based on growth. ... We know this category and we know this brand."

Yoplait is the leading U.S. yogurt, with about a 33 percent market share for the year ended Oct. 31, according to SymphonyIRI Group, a market research firm. Yoplait has been one of General Mills' star brands, with $1.5 billion in retail sales in the company's most recently completed fiscal year and accounting for 15 percent of its total U.S. retail sales.

The Yoplait deal would give General Mills the potential to broaden its foreign sales, which now make up about 25 percent of its roughly $15 billion in annual revenue.

General Mills, one of the largest U.S. packaged foodmakers, said Friday it is in "exclusive negotiations" to buy 50 percent of Yoplait, plus a controlling interest in the business.

Under French law, "exclusive negotiations" means a tentative deal has been reached, but an acquiree's workers must be consulted. General Mills said it's initiating those consultations, a process that could take a couple of weeks.

For sale since July

PAI Partners began mulling the sale of Yoplait in July, and several major global food companies have reportedly been in hot pursuit. Dow Jones Newswires, quoting a PAI spokesman, said General Mills put up the right price, but also "complied with a number of Sodiaal and French-government backed requests."

Forsythe declined to comment on that notion. But he said General Mills, unlike other bidders, has virtually no overlap with Yoplait's operations. Overlap in corporate deals usually leads to jobs being lost and plants being closed -- anathema to state and federal governments alike.

Yoplait has 1,500 employees in Europe -- 1,300 in France alone, according to its website.

The company has 29 franchisees in almost 50 countries, and General Mills is its largest single licensee. North America makes up almost half of Yoplait's gross sales.

In September, Sodiaal's licensing arm, Sodima, tried to terminate its contract with General Mills after failing to renegotiate the royalty rate. General Mills declared that the contract doesn't have language that would allow Sodima to terminate or renegotiate. The company took the dispute with Sodima to an international commerce group that specializes in arbitration.

The arbitration process could take years, but it appears a Yoplait-General Mills deal would help end the dispute. "We fully expect that matter to be resolved very soon," Forsythe said.

Judy Hong, a stock analyst at Goldman Sachs, said in a report that she viewed the Yoplait deal "favorably from a strategic standpoint, but there is a high degree of uncertainty." The deal "removes the U.S. brand licensing dispute," and it can accelerate General Mills' efforts to expand in emerging markets, she wrote.

But the Yoplait brand has "challenges" in its core European markets, "and financial implications of the deal are unclear given the absence of financial disclosure by [privately held] Yoplait."

General Mills stock closed Friday at $36.65, up 52 cents or 1.44 percent, on a day the broad market, as measured by the S&P 500, was up 0.43 percent.

Star Tribune reporter Steve Alexander contributed to this report. Mike Hughlett • 612-673-7003