Nestle/General Mills Rumor Floated, Dismissed

Jun 04, 2004

By George Anderson

A story of Nestle considering a $22 billion bid for General Mills quickly went from the biggest business news story of the day to just another dismissed rumor.

The Bloomberg news service, citing “people familiar with the matter,” reported Nestle was interested in acquiring General Mills, a company it has a 15-year joint venture
with in the cereal category.

The company been actively acquiring companies in recent years having purchased both Dreyer’s Grand Ice Cream and Ralston Purina.

Nestle’s chief executive, Peter Brabeck, however, appears to have doused the flames on the General Mills report with an interview published in the Swiss newspaper L’Agefi.

“There are no big transactions in sight,” he said. “We are established in all the major sectors which we consider to be strategic.”

Mr. Brabeck did not completely shut the door on future deals saying, “We are carefully following what is going on in the nutrition area but no company of stature is currently
on the market.”

Patrik Schwendiman, an analyst with Zuercher Kantonalbank, told Reuters, “There is no way. Nestle is completely unlikely to for several reasons. One is the huge size —
$20 billion would mean Nestle would lose its (coveted) triple A credit rating.”

“The product mix doesn’t make sense,” he added. “Maybe parts of it are interesting such as yogurt which can have health properties — but the rest of it, like biscuits, doesn’t
make sense.”

Nestle, the world’s largest food manufacturer, has indicated it intends to concentrate more of its efforts on research and development of high-profit functional foods.

Moderator’s Comment: What was your reaction to a possible Nestle deal for General Mills? Do you think the food manufacturing
and retail industry is ready to begin a new round of consolidation? What would be the impact?

George Anderson – Moderator

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