Buying Organic: General Mills Swallows Annie’s For $820 Million

Annie’s may be natural and organic — but it won’t be independent much longer.

The specialty food maker announced an agreement today to be sold to giant General Mills for $820 million. The deal consists of $46 per share in cash for Annie’s shareholders, a 37% premium over the stock’s closing price of $33.51 on Monday.

Annie’s has grown from a small player in the food business (founded in 1989) to one that had $204 million in food sales in the last fiscal year on over 145 products across 35,000 retail locations. Its rise has corresponded with the huge growth in consumer demand for organic food. Annie’s claims its products are made without artificial flavors, synthetic colors, or preservatives used in many other conventional packaged foods — like the ones General Mills is known for.

“Powerful consumer shifts toward products with simple, organic and natural ingredients from companies that share consumers’ core values show no signs of letting up.  Partnering with a company of General Mills’ scale and resources will strengthen our position at the forefront of this trend, enabling us to more rapidly and efficiently expand into new channels and product lines in a rapidly evolving industry environment,” Annie’s CEO John Foraker said in a statement.

Rising commodity costs have hampered Annie’s ability to maintain profit in recent months. While revenues were up 10% in the most recent quarter, its margins dropped. Before the General Mills deal was announced, Annie’s stock had fallen 22% on the year.

That discount may have made Annie’s an attractive target for General Mills, the conglomerate which can scoop up the younger company to boost its organic offerings. General Mills’ current organic brands, including Cascadian Farm and Muir Glen, generated $330 million in revenue in the last fiscal year. The company expects the transaction to be accretive to earnings in the first 12 months following completion.

“This acquisition will significantly expand our presence in the U.S. branded organic and natural foods industry, where sales have been growing at a 12 percent compound rate over the last 10 years.  Annie’s competes in a number of attractive food categories, with particular strength in convenient meals and snacks—two of General Mills’ priority platforms,” General Mills COO for US Retail Jeff Harmening said in a statement.

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SOURCE FORBES