US-based food group General Mills is to acquire luxury dog food maker Blue Buffalo Pet Products in an $8bn deal.
General Mills said it would buy Blue for $40 per share in cash, a premium of just over 17% on the latter´s closing price on Thursday.
It assigns an enterprise value to Blue of around $8bn, with the dog food maker currently having around $471m of debt and $283m of cash on its balance sheet.
“The addition of Blue to our family of well-loved brands provides General Mills with the leading position in the large and growing Wholesome Natural pet food category and represents a significant milestone as we reshape our portfolio to drive additional growth and value creation for our shareholders," said General Mills chairman and chief executive, Jeff Harmening.
The $30bn US pet food market is generating consistent 3-4% growth, which Millls claims is "highly attractive for retailers" based on continued market growth, premiumisation and subscription-like purchase patterns that drive traffic and repeat purchases.
Mills described Blue as the leader in the fastest-growing "wholesome natural" category with double-digit growth over each of the past three years.
Mills is already the third-largest natural and organic food producer in the US with brands including Annie's, Lärabar, Liberté, Cascadian Farm, Muir Glen, and EPIC.
Among its better-known, more mainstream brands are the Cheerios and Lucky Charms cereals as well as Häagen-Dazs ice cream.
General Mills said it would finance the transaction with debt and cash on hand, along with $1bn in equity.
The deal, which is set to close by the end of 2018, is expected to begin adding to Mills´ cash earnings per share in the 2020 fiscal year.
Blue Buffalo shares were up 16.7% in pre-market trading on Friday, at 39.83.
General Mills stock however was down 4.5%.