General Mills to Sell Green Giant, Le Sueur for $765 Million -- 3rd Update

By Chelsey Dulaney 

The Jolly Green Giant is getting a new home, with General Mills Inc. agreeing to sell its struggling frozen-and-canned vegetable business as part of efforts to focus on items that better appeal to consumers' hunger for fresher, less-processed food.

General Mills said it would sell Green Giant, along with sister brand Le Sueur, for $765 million in cash to B&G Foods Inc., owner of more than 40 mostly older brands, including Molly McButter cheese flavoring and Pirate's Booty rice-and-corn puffs.

The Green Giant brand, started 90 years ago, was long billed as a symbol of healthful fare, its mascot famous for his hearty "ho ho ho" chortle in television commercials. But U.S. views of what is healthy have shifted sharply in recent years, with many shoppers avoiding frozen and canned food for items perceived as more fresh and wholesome.

General Mills and its peers are trying to reshape themselves to address those broad changes in American eating habits. The maker of Cheerios cereal and Yoplait yogurt last year bought organic-snack maker Annie's Inc. for $820 million. In June, Campbell Soup Co. said it would buy Garden Fresh Gourmet Inc., a refrigerated salsa and hummus brand, for $231 million.

Green Giant--No. 2 in the $6 billion U.S. frozen-and-canned vegetable business after Pinnacle Foods Inc.'s Birds Eye unit--has been a loser in that process. General Mills said it shifted resources away from Green Giant in the quarter that ended in May, resulting in a $260 million charge.

The company said on Thursday that the sale "reinforces General Mills' strategic priority to shape its portfolio for growth." It said it would use the proceeds for share repurchases and debt reduction.

Green Giant and Le Sueur together had $585 million in sales last year, or about 3.3% of General Mills' total. Alexia Howard, analyst at brokerage Bernstein, said Green Giant's frozen-vegetable sales fell 11% in the past 52 weeks. She said the sale could be a precursor to a broader purge by General Mills of slow-growing, low-margin businesses to free it up to make more acquisitions in the natural-foods area such as the Annie's deal.

B&G has built its business buying up prominent-but-passé brands. With Green Giant, it said it plans to add people to its sales force and marketing department in an effort to stabilize and then revitalize sales growth.

"Although Green Giant has struggled recently, it's a truly iconic brand, " B&G Chief Executive Bob Cantwell said in an interview. "There is a lot of opportunity to move the needle up on this brand by being more innovative and reinvigorating the brand, as we've done with dozens of other acquired brands over the years."

B&G bought Cream of Wheat from Kraft Foods Inc. eight years ago and has reversed sales declines and increased profitability. Adding frozen-food capabilities for the first time provides the potential for more acquisitions down the road, Mr. Cantwell said.

Shares of B&G added 1.8% to $31 in recent trading Thursday, while General Mills shares were about flat.

B&G, which logged $848 million in revenue last fiscal year, said it will double the marketing dollars that General Mills was spending on Green Giant, especially geared toward the harder-hit frozen section.

Gary Stibel, founder of the New England Consulting Group, said a smaller company like B&G can make a difference with Green Giant. "Not all frozen food is declining [in sales], just the old, established brands that haven't figured it out," he said.

General Mills said after the sale, expected to close in the fourth quarter, it would continue to operate Green Giant in Europe and other export markets under license from B&G.

General Mills' moves echo those by rivals such as Campbell Soup Co., which has acquired refrigerated juice and salsa brands to offset sales declines in its stable of canned soups and V8 juices.

Campbell on Thursday said its revenue for the quarter ended Aug. 2 fell 8.6% from a year earlier to $1.69 billion, as sales volume declined 1% and the stronger dollar decreased the value of international revenue. Its iconic U.S. soup business posted a 2% drop in sales.

Campbell Chief Executive Denise Morrison said changes in consumer preferences for food, including a greater focus on health, are pressuring grocery mainstays like canned soup and traditional food makers like Campbell. That is compounded by "the prevailing industry dynamics of consolidation and cost-cutting," she added.

Ms. Morrison argues that creating the Campbell's fresh-foods division and accelerating its efforts to get into grocery store delis and refrigerated cases will drive sales and earnings growth long term. Some analysts suggest Campbell will sell somewhat stale brands like Hamburger Helper too.

Campbell's profit fell to $68 million, or 22 cents a share, from $137 million, or 43 cents a share, a year earlier. Excluding restructuring charges associated with Campbell's cost-cutting program and other special items, per-share earnings from continuing operations were 43 cents a share.

Chelsey Dulaney contributed to this article.

Write to Chelsey Dulaney at [e-mail]

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(END) Dow Jones Newswires

September 03, 2015 15:15 ET (19:15 GMT)

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