The Minneapolis-based company plans to pay $40 a share for Blue Buffalo, which sells “antioxidant-rich” dog nutrition and walnut-based kitty litter, the companies said in a statement Friday. The deal comes as global food giants are snapping up makers of natural and organic products, which are outpacing mainstream brands in growth.
“In pet food, as in human food, consumers are seeking more natural and premium products,” General Mills Chief Executive Officer Jeff Harmening said.
The Wilton, Connecticut-based pet food maker’s shares rose as much as 17% in premarket trading. Over the past three years, Blue Buffalo has delivered compound annual net sales growth of 12%, the companies said, reaching $1.3 billion in the 2017 fiscal year.
General Mills (gis) is one of several consumer-product giants focusing on pet care, a $30 billion market in the U.S. alone. Nestle SA of Switzerland has identified its Purina division as a pillar of growth as it divests slower-growing units like its U.S. confectionery business. Cargill Inc. in January agreed to buy Pro-Pet, the maker of Black Gold dog food.
General Mills said it will finance the deal with debt, cash on hand and about $1 billion in equity. The price represents a 23% premium to Blue Buffalo’s 60-day volume-weighted average price. The deal has been approved by both companies’ boards and is subject to regulatory approvals.