FCB 금융학회

Setup Menus in Admin Panel

General Mills M&A Pitch Book

Project Background

This pitch book delivers several solid justification for Heinz’s move to acquire General Mills in exchange for cost and revenue synergies. Heinz’s heavy reliance on sauce-based products, whose already mature market implies slow growth trend, can be tackled by the addition of General Mills’ 9+ unmatched product categories. This allows reshaping its portfolio, which in return, create healthy top line growth for Heinz. Moreover, General Mills’ efforts to reduce high COGS and SG&A, as it should be an overall food industry challenge, through Holistic Margin Management allow Heinz to achieve significant cost synergies. Lastly, General Mills’ response to declining organic growth and R&D trend by acquiring Blue Buffalo, a pet food manufacturer, and establishing its venture capital introduce a growth-sustaining strategy to become an international powerhouse for Heinz.

  • Part 1. Target Industry Overview – Global F&B and Packaged Food Industry
  • Part 2. Investment Highlights
  • Part 3. Target Business Overview – General Mills, Inc.
  • Part 4. Target Financial Overview – General Mills, Inc.
  • Part 5. Valuation Overview – Football Field Chart

Project Leaders

Shin, Jae won

Finance Project Member
FCB Finance Institute

Concentration Area: M&A Advisory

Lee, Seong Jae

Finance Project Member
FCB Finance Institute

Concentration Area: M&A Advisory

Park, Ye Seul

Finance Project Member
FCB Finance Institute

Concentration Area: M&A Advisory

Finance Project Portfolio

Part1. Target Industry Overview – Global F&B and Packaged Food Industry

The global food industry’s slow and stable growth rate and huge market size confirm it as a mature industry with defensive nature in stock market. It and its sub-category, packaged food industry, are expected to attain $7.38 trillion with CAGR 3.5% and $3.03 trillion with GAGR 4.5%, respectively by 2021. The trend in healthy food, new products and more people eating at home, have pushed the industry to meet customers’ taste and needs and introduce new food category. The challenges it faces are the followings; it has high COGS and SG&A proportion relative to revenues and it has low CAPEX and R&D cost, which hamper organic growth. One of the breakthroughs is to participate in M&A activities to increase market share and pioneer into new market.

Part2. Investment Highlights

This M&A deal involves two investment highlights. First, the combined entity will reshape its product portfolio. The transaction will introduce GIS’s unmatched iconic brand portfolio across +9 diverse categories to Heinz’s traditional sauce-based portfolio. As a result, it is expected to become 1st or 2nd in each of their product category markets. Second, with low CAPEX and R&D costs, General Mills rather focuses on its innovation through acquisition. Its venture capital fund, called 301 Inc, offers unique perspectives and innovative approaches to new products, testing a range of innovative products with established operations, marketing, and customer bases. Additionally, GIS acquired a pet food manufacturer, called Blue Buffalo for new growth engine.

Part3. Target Business Overview – General Mills, Inc.

 As a leading global manufacturer and marketer of branded consumer goods, General Mills sells its diversified products to more than 130 countries worldwide. The ownership structure implies that it is nearly impossible to acquire 100% shares due to dilution and cost issues. Therefore, we recommend to acquire 25% of total shares with 25% premium to the current market price for the purpose of management control. This transaction requires total $8.1 billion, of which $6.2 billion will be financed through equity and the remaining $2.0 billion will be financed through debt. The combined entity will achieve over $20 billion sales, becoming the third largest player in the US food and beverage industry. Integrating two separately established global footprints can create revenue synergies.

Part4. Target Financial Overview – General Mills, Inc.

The graph on the bottom right displays net sales declining especially from 2014 to 2017. This is mainly due to fierce competition in yogurt market and several product recalls. However, we can see that the company recovered its top-line again in 2018 due to continuous efforts to restore trust and new business initiatives. One of the highlights General Mills possesses is its industry leading operating margin, approximately 16% as opposed to 6% operating margin on average in food industry. As a result, this leads to strong operating cash flow, which is returned to shareholders as a form of dividends and share repurchase.

Part5. Valuation Overview – Football Field Chart

Total four valuation methods are employed to display reasonable price band for General Mills’s enterprise value. For Trading comps, four comparable companies in the US food industry are selected. For Transaction Comps, two recent transaction in the US food industry are selected; Synder’s – Lance & Campbell Soup and Pinnacle Foods & Conagra Brand. For DCF, WACC of 6.11% – 7.11% as well as TGR of 0.75% – 1.25% are used. As a result of the four valuations, the implied takeout price turns out to be $54.94 per share based on 25% premium to the current market price. We believe that such price is affordable since it falls within the Transaction Comps’s range with its enterprise values being reflected in reality, and stakeholders, who think GIS’s share overvalued, are willing to sell their shares and take capital appreciation.

Join a Finance Project

서류, 면접에서 활용할 금융권 포트폴리오를 만들고 싶으신가요? 프로젝트를 통해 실무와 네트워킹을 한번에 해결할 수 있습니다. 도전하세요!

기본 프로젝트

금융권 IB(M&A) 부서의 역할 및 인재상 학습ㅣIB(M&A) 입사 지원서 키워드 & 면접 가이드ㅣIB(M&A) 포트폴리오의 중요성

바로가기
리서치 심화 프로젝트

금융 주식 리서치 부서의 역할 및 인재상 학습ㅣ주식리서치 입사 지원서 키워드 & 면접가이드ㅣ리서치 포트폴리오의 중요성

바로가기
IB 심화 프로젝트

자산 및 파생운용 부서의 역할 및 인재상 학습ㅣ증시 데이터 활용 및 퀀트 백테스트의 중요성ㅣ퀀트 포트폴리오의 중요성

바로가기
FCB 금융권 커뮤니티

금융권 신입 및 인턴 입사 시 필요한 활동 숙지ㅣ금융권 신입 입사지원서 키워드 & 면접가이드ㅣ금융권 데일리 과제 실습의 중요성

입장하기

Legal Disclaimer

본 웹페이지에 명시된 디지털 자료는 대중에게 공개되어 있는 공적인 자료 (Public Information/Data)를 기반하여 학습 목적으로 모의로 재구성한 연습 자료 (case study) 로서, 실제 발생한 사건과 연관이 어떠한 경우도 없으며, 작성자 또는 본 금융학회는 이를 바탕으로 어떠한 경제적인 이득을 취하지 않음을 알려드립니다. 해당 자료를 기반으로 투자 및 투자 의사결정 결과에 어떠한 법적인 책임을 지지 않으며, 또한 학습 목적으로 사용을 원할시 본 금융학회의 서면 동의가 필요합니다. 본 금융학회의 동의없이 금전적인 목적으로 해당자료를 사용할 시, 저작권법에 의해 법적인 책임을 지을 수 있습니다.  인재채용 심사 목적으로 자료 전체 열람을 원할시 info@fcbfi.org 로 문의바랍니다.

사업자번호: 107-19-79173 · 주소: 서울시 영등포구 국제금융로 20 · 통신판매업: 제2015-서울영등포-1572호 · 대표: 이혁재 · 개인정보관리자: 노정균 · 고객문의: info@fcbfi.org · 이용약관 · 개인정보취급방침 COPYRIGHT(C)2023 FCBTS INSTITUTE. ALL RIGHTS RESERVED.

Setup Menus in Admin Panel