Diageo's protracted exit from the food industry is to accelerate after the distiller detailed plans to sell the bulk of its stake in General Mills, the US maker of Cheerios cereal.
The spirits group, which counts Johnnie Walker whisky and Smirnoff vodka among its many drinks brands, said yesterday it was looking to sell 49.9 million shares, worth about £2.2 billion (€3.2 billion), primarily through an underwritten public offering.
The offering will be handled by Citigroup, Merrill Lynch, Morgan Stanley and Lehman Brothers. It will involve about 33.4 million shares.
Diageo expected that the other 16.5 million shares would be bought by General Mills, which yesterday announced an arrangement with Lehman Brothers to fund the purchase.
General Mills said it would sell $835 million of class B preferred interests in General Mills Cereals, a subsidiary, to an affiliate of Lehman. In turn, Lehman plans to raise $750 million through the issuance of three-year notes exchangeable into General Mills common stock in October 2007.
After the disposal, Diageo will still own about 29 million shares in the US food maker. These can be sold from October 2005, the drinks group said. Diageo's stake in General Mills is a legacy of its former ownership of Pillsbury, the food group.
As part of its attempt to become a focused premium drinks manufacturer and marketer, Diageo sold Pillsbury to General Mills, accepting General Mills shares as part-payment.
As well as its ongoing stake in General Mills, Diageo retains an exposure to the food industry in the form of Burger King, the fast-food chain.
Although it sold the business to a consortium led by Texas Pacific, it provided debt and loan guarantees worth just more than $1 billion to seal the deal.
