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General Mills Set to Buy 50% of Yoplait

General Mills is set to buy the 50% stake of yogurt maker Yoplait owned by PAI Partners. The food giant will pay about 800 million euro ($1.1 billion) for the stake, Reuters reported. The deal values Yoplait at 1.6 billion euros, which is four times the value of the business when PAI Partners invested in 2002, Reuters said. French dairy cooperative Sodiaal will retain the remaining 50 percent of the business.

(Reuters) – General Mills (GIS.N) is set to buy a 50 percent stake in French yogurt maker Yoplait from PAI Partners for roughly 800 million euros ($1.1 billion), three sources close to the situation said on Thursday.

The deal would give Yoplait, the world’s second-largest yogurt maker after Danone (DANO.PA), a total value of 1.6 billion euros, some four times the value of the business when PAI invested in 2002.

French dairy cooperative Sodiaal will retain the remaining 50 percent of the business. A spokesperson for Sodiaal said PAI would make an announcement regarding its stake in Yoplait by Friday morning.

“The transaction leaves everybody happy, and Sodiaal would feel there was a partner that was really committed to taking the business forward and had the means to do so,” said a source familiar with the matter.

Another source familiar with the deal said both Mexico’s Groupo Lala and Nestle (NESN.VX) were in a good position to win the bid, but General Mills’ strong financials helped win the day.

“(General Mills) could pay for it off their balance sheet,” said a person close to the deal. “No mess or fuss.”

A deal with General Mills, which also makes Cheerios cereals and Haagen-Dazs ice cream, will resolve a conflict with Yoplait parent group Sodima, which told the U.S. firm last year it wanted to terminate their long-running licensing agreement.

General Mills, whose brands include Pillsbury and Betty Crocker, has distributed Yoplait yogurt in the United States for more than 30 years, analysts said.

The acquisition of the Yoplait stake protects General Mills’ distribution rights in the U.S. and eliminates the risk of a competitor edging in on that business, analysts said.

“The price is a bit higher than expected, but settles an ongoing question mark,” said Janney Capital Markets analyst Jonathan Feeney.

“On its face, the deal increases (General) Mills’ exposure to competitive, slower-growing Western European markets, which doesn’t make a lot of sense without some consideration of settling that risk,” Feeney said.

Last year, General Mills said it would acquire the Mountain High yogurt brand from Dean Foods. (DF.N)

General Mills, which also sells Green Giant vegetables and Progresso soup, is part of a U.S. packaged food industry that has been squeezed in recent months by rising prices for ingredients like wheat and cocoa, and concerns that recession-weary consumers will resist the price increases needed to help cover those costs.

In December, General Mills said it was on track to cut $1 billion in costs by the end of May 2012, which should help offset rising commodity costs.

Shares of General Mills traded at $36.08, up 3 cents, in afternoon trading on the New York Stock Exchange. (By Simon Meads and Nina Sovich; Additional reporting Victoria Howley, Noelle Mennella, Martinne Geller and Jessica Hall; Editing by David Holmes, Will Waterman, Dave Zimmerman) ($1=.7137 Euro)