General Mills to exit North American yogurt market in $2.1bn deal with Lactalis and Sodiaal

General Mills, Inc. (NYSE: GIS) has announced definitive agreements to divest its North American Yogurt business to Lactalis and Sodiaal, two prominent French dairy companies, in deals totalling $2.1 billion USD. Following regulatory approval, the transactions are expected to close in 2025. The U.S. business will be acquired by Lactalis, while Sodiaal will take over the Canadian operations, with both entities set to operate independently.

Divestiture Details and Strategic Realignment

The agreements encompass the sale of the U.S. and Canadian operations of several yogurt brands, including Yoplait, Liberté, Go-Gurt, Oui, Mountain High, and. These brands represent a significant portion of General Mills’ North American Yogurt business, which contributed approximately $1.5 billion USD to the company’s net sales in fiscal 2024. The deal also includes manufacturing facilities located in Murfreesboro, Tennessee; Reed City, Michigan; and Saint-Hyacinthe, Québec.

General Mills Chairman and Chief Executive Officer Jeff Harmening highlighted the move as a significant advancement of the company’s Accelerate strategy. “Upon completion of these divestitures, we will have turned over nearly 30 percent of our net sales base since fiscal 2018,” Harmening said. This strategic shift aims to enhance focus on global platforms and local gem brands with stronger growth potential and more attractive margins.

Financial Implications and Future Outlook

General Mills anticipates the transactions will be approximately 3 percent dilutive to adjusted earnings per share in the first 12 months following the close, excluding transaction costs and other one-time impacts. The company plans to use the net proceeds for share repurchases, aligning with its focus on generating top-tier shareholder returns over the long term. Further financial impact details are expected to be provided when General Mills reports its first-quarter results on September 18, 2024.

J.P. Morgan served as the exclusive financial adviser, and Cleary Gottlieb Steen & Hamilton LLP acted as the legal adviser for the transactions.

Sodiaal Expands Internationally, Reinforces Strategic Plans

Sodiaal, which has acquired Yoplait’s operations in Europe and owns the Yoplait and Liberté brands globally since 2021, sees this acquisition as reinforcing its position as a leading global dairy player. Jean-Michel Javelle, President of Sodiaal, stated, “This project further confirms Yoplait’s return to the cooperative’s vision, a true national heritage brand that makes our farmers and employees proud.”

Sodiaal’s acquisition aligns with its “Grandir Ensemble” strategic plan, focused on brand value enhancement, operational performance, and international expansion. The transaction will allow Sodiaal to oversee Yoplait’s operations in Canada, generating an estimated annual revenue of CAD 500 million by May 2024. The Saint-Hyacinthe manufacturing site in Québec is included in this acquisition.

Lactalis to Bolster U.S. Presence

Concurrently, General Mills has agreed to sell its U.S. yogurt operations to Lactalis, including the rights to operate the Yoplait and Liberté brands in the United States. This will involve the termination of the current Yoplait and Liberté brand licensing agreement with General Mills and the establishment of a new licensing agreement with Lactalis. Sodiaal will retain the exclusive ownership of the Yoplait and Liberté brands globally.

Strategic Shift in the Dairy Industry

These transactions signify a significant shift in the North American dairy industry landscape. As General Mills refocuses on high-margin brands and global platforms, Lactalis and Sodiaal strengthen their market positions in North America. The deals are set to shape the competitive dynamics in the U.S. and Canadian yogurt markets, potentially impacting pricing, distribution, and product innovation.