Milling & Baking News - June 14, 2011 - (Page 18)

Business  Analyst: Nestle ‘unlikely’ to acquire General Mills NEW YORK — Despite common business ventures, shared brands and attractive categories, Vevey, Switzerlandbased Nestle S.A. “is unlikely” to buy Minneapolis-based General Mills, Inc., according to a May 26 research report from Sanford C. Bernstein. The report, prepared by senior research analyst Andrew Wood, said that Nestle could afford to buy General Mills, and it likely would be marginally accretive to year one earnings, but any transaction is unlikely at this time. “Our research indicates that many of General Mills’ categories are of we do not see any other company big enough, or interested enough, to acquire General Mills … such that the current status could easily persist for another 10 years. “Unfortunately, a view that nothing will happen is always difficult to prove; after all, it may not have happened yet, but it could always happen tomorrow … we just do not think it will.” Mr. Wood said much of the speculation is a result of the common business ventures between the companies — such as Cereal Partners Worldwide, a 50-50 joint venture that makes breakfast cereals outside of the United States and Canada — or shared brands — such as Häagen Dazs ice cream, which is owned by General Mills globally except in the United States and Canada, where it is licensed to Nestle. A barrier to a potential acquisition also may be found in the categories in which the companies compete, Mr. Wood said. He noted that while Nestle has transformed its business over the past decade by moving into fastergrowth, valued-added categories such as baby food, clinical nutrition and pet food, General Mills has remained focused on dinner mixes, canned/ frozen vegetables, canned soup/meat and frozen bakery — categories of little interest to Nestle. Using a “traffic light” approach to determine category attractiveness, Mr. Wood estimated only 14% of General Mill’s business is “green,” or “high interest.” Those categories are ice cream, C.P.W. breakfast cereals and frozen pizza. “We consider Nestle could have high interest in General Mills’ 50% stake in C.P.W., the global rights to Häagen Dazs and the U.S. frozen pizza business (as a supplement to the ‘Our research indicates that many of General Mills’ categories are of limited interest to Nestle.’ — Andrew Wood, Sanford C. Bernstein limited interest to Nestle, that the market exposure is not attractive and, overall, it would likely be dilutive to Nestle’s growth,” Mr. Wood said. He said the research firm has maintained this stance for more than 10 years, but speculation of a Nestle acquisition of General Mills has continued. “We feel that from a category, market and overall growth perspective, General Mills will be insufficiently attractive to Nestle …, and we find it very unlikely that an acquisition will happen,” Mr. Wood said. “Unfortunately, this has been our position for +10 years … yet the speculation does not subside. Nestle is extremely unlikely to be drawn into making any comments about market speculation on acquisition targets, plus Kraft frozen pizza business acquired in 2010 … although there may be some anti-trust issues),” he said. Thirty-six per cent of General Mill’s business was “yellow,” or “medium interest.” This grouping included the U.S. cereal business, especially if it was acquired in addition to C.P.W., snack bars and the Yoplait yogurt business. Mr. Wood said the yogurt business, although attractive, was not considered a “green” because if Nestle had significant interest it should have been able to pay more than General Mills in the recent bidding process for the 51% stake in the business. The remaining 50% of General Mills’ business was considered “red,” or “low interest.” “We consider that 50% of General Mills’ business would be unattractive for Nestle, including categories such as bakeries/food service, dinner mixes, canned/frozen vegetables, canned soup/meat, frozen bakery,” Mr. Wood said. “Such a high proportion of a business being ‘unattractive’ is unlikely to warrant a pursuit.” From a market perspective, Nestle’s exposure also is better than General Mills, Mr. Wood said. The Swiss-based company derives 39% of its sales in the faster-growing emerging markets, compared with 10% for General Mills. Meanwhile, only 28% of Nestle’s sales are in North America, compared with 74% for General Mills. “Part of Nestle’s strategy (and success) has been based on not being too leveraged to one particular market and/or category … and that diversity has allowed Nestle to continue to deliver strong operating results no matter what the market/economic environment,” Mr. Wood said. “In our view, given that General Mills is overleveraged to the U.S./North America, which is already Nestle’s biggest market, we do not believe that Nestle would be interested in acquiring another big U.S. asset.” MBN and small particulate matter emissions by 63%,” said John Thorpe, president of G.P.C. “The result is that smoke, odor and haze issues that have concerned the Muscatine community will be nearly eliminated.” G.P.C. said the new dryer and environmental controls will enable the company to reduce total emissions by 72% compared with current levels by 2015, with additional improvements reducing emissions to 18% of current levels by 2020. MBN / Grain Processing investing $100 million in emission reduction projects MUSCATINE, IOWA — Grain Processing Corp. late last month broke ground on a four-year, two-part project at its Muscatine facility that is expected to reduce emissions and improve operational productivity. In total, G.P.C. said it will invest $100 million in the projects. As part of the first project, G.P.C. will build a $75 million grain dryer on the 18 / June 14, 2011 Milling & Baking News Muscatine facility’s south side along the Mississippi river. An additional $20 million will be used to upgrade environmental control systems for the facility’s boilers. Both projects are expected to be completed in 2015. “These two projects will help G.P.C. reduce sulfur dioxide emissions by 87%

Table of Contents for the Digital Edition of Milling & Baking News - June 14, 2011

‘Grain chain’ gives unanimous support for MyPlate
Canadian government targets C.W.B. monopoly on wheat marketing
MacLennan named president of Cargill
Celebrations may be premature for bakery fl our buyers
Editorial - Last hope for Doha Round not becoming non-Round
Wayne Turnbull reopens New Orleans bakery
General Mills adds Fiber One 90-Calorie Brownies
Packaged snacks sales reach $64 billion
Nestle joins project of food, genes
G.F.F.: One-ounce servings key to balanced meals
Oldways director offers mixed review of MyPlate
Stimulus boost for SNAP helps avert diminished food security
Smucker full-year profi t falls 3% on restructuring, acquisition costs
Debate likely to rage on, but HFCS demand seen stabilizing in U.S.
Kellogg sets 2010 to the side, looks forward to better 2011
Analyst: Nestle ‘unlikely’ to acquire General Mills
Grain Processing investing $100 million in emission reduction projects
Winter wheat crop forecast for 2011 up 2% from May
Wheat carryover forecast for 2012 lowered to 687 million bus
High fuel prices push shipping costs up; weather slows Upper Midwest rail traffi c
Canadian government targets C.W.B. monopoly on wheat marketing
Irish Pride launches bread with omega-3 fatty acids
Acquisitions help drive revenue gains at Aryzta in quarter
F.A.O. sees no respite from grain price strength and volatility
Gonnella offering scholarship to attend AIB
Paul Ridder named president of Tasty; Charles Pizzi to remain as adviser to Flowers
Chris Delaney named c.e.o. of Goodman Fielder
Bob Klima joins Caravan as business development manager
Fruit powder provides vitamins, fiber
Non-dairy ingredient achieves pareve certification
Products focus on noodle production
Trademark signifi es sustainable palm oil
Enzyme concentrate enhances baking properties of flour
U.S.D.A. raises forecast for 2011-12 world wheat ending stocks
Ingredient Market Trends
Ingredient Week
Marketplace Business Network
Ad Index

Milling & Baking News - June 14, 2011