General Mills Inc. share price down, acquires Annie’s Inc. to expand reach in natural and organic foods

General Mills Inc. revealed in a statement that it has agreed to acquire Annies Inc. in a deal estimated to about $820 million. The acquisition, which is expected to be finalized by the end of 2014, will further expand General Mills range of natural and organic foods that includes the Cascadian Farm and Food Should Taste Good brands.

“Annie’s competes in a number of attractive food categories, with particular strength in convenient meals and snacks – two of General Mills’ priority platforms,” Jeff Harmening, chief operating officer of the U.S. retail business of General Mills, said in the statement that was cited by Bloomberg.

According to the companys statement, the shareholders of Annies are to receive $46 per share in cash. The price is 37% above Annies closing price on September 7th. The company has a large variety of products – more than 145, and is present in more than 35 000 retail locations in the U.S. and Canada. Annies net sales rose by 20% to $204 million in the fiscal year ended in March this year. In comparison, General Mills reported a revenue estimated to $17.9 billion for the latest financial year.

The deal marks the latest efforts not only of General Mills, but also of other big food companies to answer the customers increasing interest towards foods made using more natural and fewer artificial ingredients. General Mills also shared in its statement that its profit is expected to be boosted within the first year due to the acquisition, excluding certain transaction related expenses.

The company has been trying to bolster its sales over the last few years in the conditions of lower consumer spending and increasing influence of big retailers in pricing. Sales of cereals have been declining as Americans began to prefer foods richer on protein. In comparison, sales of organic and natural foods have been growing at a 12% compound rate for the last 10 years, Mr. Harmening said.

General Mills Inc. fell by 0.58% on Monday to close at $53.51 per share yesterday, marking a one-year change of +8.78%. The company is valued at $32.64 billion. According to CNN Money, the 14 analysts offering 12-month price forecasts for General Mills Inc. have a median target of $53.50, with a high estimate of $58.00 and a low estimate of $45.00. The median estimate represents a -0.02% decrease from the last price of $53.51.