The Federal Trade Commission deadlocked 2-2 yesterday on whether to approve General Mills Inc.'s planned $6.1 billion purchase of Pillsbury Co.
FTC general counsel William Kovacic says that since there's no majority vote against the deal, the merger can go forward.
The purchase of Pillsbury from Diageo PLC, a London-based food and drinks conglomerate, will create the world's fifth-largest packaged food company. Under the deal, General Mills will assume $5.3 billion in debt.
Diageo was less lucky in another deal acted on yesterday by the FTC, which voted 5-0 to ask a federal judge to block the purchase of Seagram's liquor and wine business by Diageo and the French company Pernod Ricard SA.
Diageo, the world's number one alcoholic beverage company, wants to buy 61 percent of Seagram's liquor and wine business; the rest would be bought by Pernod. The FTC says the deal would create "a dangerous likelihood of reduced competition and higher prices."
The General Mills acquisition of Pillsbury, agreed on in July 2000, also created antitrust concerns. To clear the way for approval, General Mills last February made a deal to sell some divisions to International Multifoods: General Mills' Robin Hood floor business and Hungry Jack potato line, and Pillsbury's dessert and specialty products.
Pillsbury, symbolized worldwide by the Pillsbury Doughboy, is the No. 1 producer of refrigerated doughs in the United States. It also makes Green Giant vegetables, Haagen-Dazs ice cream, Old El Paso Mexican foods and Progresso soups.
General Mills is the nation's No. 1 cereal maker, including Cheerios, Lucky Charms, Trix and Wheaties. It also makes Yoplait and Columbo yogurt, Betty Crocker dessert mixes, Hamburger Helper, Bisquik and snacks such as Chex Mix and Pop Secret popcorn.
Under the deal, General Mills would nearly double its annual sales to about $13 billion, but still would be dwarfed by Nestle SA, which at $50 billion is the packaged food industry's largest company.
Shares of General Mills closed up 5 cents to $43.20 in trading on the New York Stock Exchange yesterday. U.S. shares of Diageo fell $1 to $39.20 in trading on the New York Stock Exchange.
"The Pillsbury brands really take General Mills into other areas of the grocery store," said Leonard Teitlebaum, a food analyst with Merrill Lynch & Co. in New York. "General Mills is a renowned marketing company, arguably the best in the food business."
Pillsbury now employs around 20,000 people; General Mills about 11,000. Job losses are likely because both still maintain headquarters in the Twin Cities area.
"For some families, one family member works for General Mills, and another one works for Pillsbury," Teitlebaum said.
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