General Mills (GIS) has set its sights on Tyson Foods’ (TSN) pet food unit as it looks to strengthen its Pet portfolio. The global food company has tabled a $1.2 billion takeover bid from which it also stands to benefit from a $225 million tax subsidy. The transaction is expected to close in the first quarter of Fiscal 2022.
The investment comes amid strong demand for pet food as more people resort to having pets amid the pandemic. According to CEO Jeff Harmening, the acquisition will add an attractive business to a fast-growing pet platform. The deal will also position the company as a leader in pet food and reshape its portfolio for growth. The acquisition is expected to complement the company’s existing businesses.
Harmening stated, “Today’s announcement reinforces our commitment to using all capital allocation levers – including investment in the business, dividend growth, strategic acquisitions, and share repurchases – to drive top-tier shareholder returns over the long term.”
The acquisition is expected to be accretive to earnings upon completion. Furthermore, the company has confirmed it is acquiring a manufacturing facility in independence Iowa.
The unit that General Mills is acquiring generated more than $240 million in net sales for the fiscal year ended April 3, 2021. (See General Mills stock analysis on TipRanks).
Deutsche Bank analyst Steve Powers has reiterated a Buy rating on the stock. The analyst has raised his price target to $65 from $61, implying 2.52% upside potential to current levels.
Consensus among analysts on Wall Street is a Moderate Buy based on 3 Buys and 2 Holds. The average analyst price target of $66.60 implies 5.05% upside potential to current levels.
GIS scores a 6 out of 10 on the TipRanks’ Smart Score rating implying its performance is likely to align with market expectations.