GENERAL MILLS ACQUISITION RUMORS DENIED

Nestle Says No Such Deal Being Considered

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NEW YORK (AdAge.com) -- Responding to a swirl of thin news reports and spreading rumors, Nestle and analysts who watch the company deemed it unlikely that Nestle is considering the $22 billion acquisition of struggling food behemoth General Mills.

The initial rumors, which first circulated in Europe, were given a sense of credibility in the U.S. when Bloomberg News, citing anonymous sources, indicated such a deal was under serious consideration.

'In no uncertain terms'
Nestle spokesman Francois Perroud declined to comment directly on the rumor but cited CEO and vice chairman Peter Brabeck's comments earlier this week that "in no uncertain terms" is there a large acquisition on the horizon for the company.

A spokesman for General Mills did not return calls for comment by press time.

Nestle reported 2003 sales of $65.5 billion, up 13.7% from $57.6 billion in 2002. General Mills had total worldwide sales of $10.5 billion in 2003.

Earlier today, Prudential Securities analyst John McMillin put out a note calling the rumored deal "wishful thinking" by General Mills shareholders, whose investments have suffered during the last few years since General Mills purchased Pillsbury and has failed to meet historical top-line growth of 5% to 6%. Another analyst similarly dismissed the reports as "unlikely."

Prior relationship
Nestle and General Mills have worked closely in recent years, with a global cereal venture in place for more than 10 years (a deal that includes a caveat preventing Nestle from making a hostile bid for Mills) and a 99-year licensing agreement for the Haagen-Dazs brand in North America.

Mr. McMillin noted Mr. Brabeck's recent denials of any acquisitions and said Nestle's still-fresh buys of Ralston Purina and Chef America "have left Nestle in a digestion period and not in an acquiring mood."

He did add, however, that "there will likely be another round of food industry consolidations," noting in particular Campbell Soup Co. and General Mills as marketers "facing increasing headwinds" that "may be open to more inquiries." Only Nestle, Kraft Foods or Unilever could afford such major deals, he said.

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Bradley Johnson contributed to this report.

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