E-Malt.com News article: 3389

UK: Diageo plc announced on October 5 it raises $2.26 billion from sale of 49.9 million shares of common stock of General Mills for $45.20 per share before fees. Diageo has transferred 4 million General Mills shares to the Diageo UK pension plan reducing the deficit on post employment plans by £100 million. The profit on disposal, before tax and goodwill written back, is approximately $370 million ( £205 million). Diageo now holds 25 million shares of the common stock of General Mills, which could be monetised after October 2005.

Commenting, Paul Walsh, Chief Executive Officer of Diageo, said: "We had targeted a disposal of these shares in calendar 2004 and we are delighted to be able to make this announcement today. By way of this transaction we have monetised the majority of our holding in General Mills with now only 25 million shares still in our ownership. Today’s transaction represents one of the last steps on our strategic journey to build the world’s leading premium drinks business".

The disposal proceeds will initially be used to reduce net debt. Diageo intends to make a further communication in due course in which it will, following formal Board approval, confirm the future capital structure of the company. On 31 October 2001 Diageo disposed of its Pillsbury packaged food business to General Mills as part of the decision to focus on premium drinks. The consideration for the disposal included 134 million shares in the common stock of General Mills. Since that date Diageo has reduced its shareholding by 109 million shares, including the transactions which have been announced today. Diageo retains 25 million shares of the common stock in General Mills which are valued at $1.1 billion as at 4 October 2004 and which are subject to a call option with General Mills expiring in October 2005.

For the year ending 30 June 2005 Diageo accounts for its shareholding in General Mills as an investment and dividends received are included in the profit and loss account. Following this transaction the remaining 25 million shares in the common stock of General Mills which Diageo holds will continue to be accounted for as an investment at a book value of $910 million. Dividends received in respect of these shares will continue to be included in the profit and loss account.

Citigroup, Merrill Lynch & Co., Morgan Stanley and Lehman Brothers are acting as representatives of the underwriters. UBS Investment Bank is acting as financial advisor to Diageo. Sullivan & Cromwell LLP are acting as U.S. legal counsel and Slaughter and May as English legal counsel to Diageo.

Diageo is the world's leading premium drinks business. With its global vision, and local marketing focus, Diageo brings to consumers an outstanding collection of beverage alcohol brands across the spirits, wine and beer categories including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, Captain Morgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageo trades in some 180 markets around the world and is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE).


05 October, 2004