General Mills Inc recently said it would buy Tyson Foods Inc's pet treats business for $1.2 billion in cash, as the cereal maker builds its pet food portfolio at a time people are increasingly adopting cats and dogs.
The deal would add Nudges, Top Chews and True Chews brands to General Mills' portfolio that already includes Blue Buffalo pet foods label. The Cheerios maker bought Blue Buffalo for $8 billion in 2018, betting on the fast-growing pet foods segment.
The bet has paid off for the company as consumers staying at home have adopted more pets over the past year to help relieve stress during the COVID-19 pandemic, and are buying premium foods for their pets.
Adoption rates at U.S. animal shelters jumped as much as 40% in 2020 over the previous year.
"Pet food is a high-growth category, fueled by the humanization of pets, a trend that has only increased during the pandemic," said Bethany Quam, General Mills' pet food segment president.
Pet Food Sales Increase
General Mills' sales of pet foods rose 13% for nine months ended 28 February, while Tyson Foods' pet treats portfolio recorded more than $240 million in net sales in the 12 months ended 3 April.
General Mills expects the acquisition to modestly add to its earnings in the first 12 months after the deal, which is expected to close in the first quarter of fiscal 2022.
As part of the deal, which would be funded with cash on hand and short-term borrowing, General Mills would also acquire a manufacturing facility in Independence, Iowa.
Tyson Foods, whose shares rose marginally in premarket trading, said it would provide meat ingredients for the pet treats business even after General Mills assumes ownership.