General Mills shares fell 3 percent at opening bell Friday after the company announced lower sales estimates for the year and on news that rival Kraft Heinz made a bid for Unilever.
The Golden Valley-based maker of Cheerios and Betty Crocker cake mixes said Friday it expects net sales to drop 4 percent fiscal year 2017, which ends in May. This is at the lower end of its previous guidance of sales dropping between 3 and 4 percent. The disappointing sales numbers are primarily due to soup and yogurt.
General Mills stock has fallen significantly in the last two days following two big news events for its industry peer Kraft Heinz. Wall Street has been anticipating that Kraft Heinz, run by Brazilian-based 3G Capital, would soon make another takeover bid. Oreo-maker Mondelez International and General Mills were rumored to be the favorites.
But Chicago- and Pittsburgh-based Kraft Heinz, maker of Velveeta cheese and salad dressings, reported lackluster quarterly results after market closed Wednesday. Its management team downplayed any interest in merger and acquisition talks with investors on a call Wednesday night, sending downward all of the major food companies’ stocks early Thursday morning.
The market awoke Friday morning to another surprise: Kraft Heinz had made a bid for Unilever, which the London-based maker of Hellmann’s, Lipton Iced Tea and Ben & Jerry’s ice cream quickly rejected. The $143 billion bid marked the largest food consolidation attempt. Unilever said the $50 per share offer “fundamentally undervalues” the company, Bloomberg reports.
General Mills said it expects to deliver an adjusted operating profit margin of upward of 18 percent for the fiscal year, an increase of more than 120 basis points over last fiscal year.
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