General Mills, Inc. and Blue Buffalo Pet Products, Inc. have entered into a definitive agreement under which General Mills will acquire Blue Buffalo for $40.00 per share in cash, representing an enterprise value of approximately $8 billion. The transaction establishes General Mills as a leader in the U.S. Wholesome Natural pet food category, the fastest growing portion of the overall pet food market, and accelerates its portfolio reshaping strategy.
 
Founded in 2002, Blue Buffalo is the fastest growing major pet food company making natural foods and treats for dogs and cats under the BLUE brand, which includes BLUE Life Protection Formula, BLUE Wilderness, BLUE Basics, BLUE Freedom and BLUE Natural Veterinary Diet.  BLUE is the #1 Wholesome Natural pet food brand in the U.S. with $1.275 billion in net sales and $319 million in Adjusted EBITDA for fiscal year 2017, representing an Adjusted EBITDA margin of 25%. Over the past three years, Blue Buffalo has delivered compound annual net sales growth of 12% and Adjusted EBITDA growth of 18%.  
 
“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 CEO Jeff Harmening. 
 
“We are competing more effectively in our existing categories by really listening to consumers and providing a variety of options that meet their needs,” Mr. Harmening continued. “In pet food, as in human food, consumers are seeking more natural and premium products and we have tremendous respect for how attentive Blue Buffalo has been to the needs of their consumers, pet parents and pets, as they have built their brand. As we have done with Annie’s, Lärabar and EPIC, we expect to help Blue Buffalo by leveraging our extensive supply chain, R&D and sales & marketing resources. We will in turn benefit from their experience building one of the strongest pull brands in the CPG world.”
 
“I have been impressed by General Mills’ strong track record of accelerating growth for its natural and organic brands, while giving them the freedom to maintain their own unique culture and identity,” said Billy Bishop, Blue Buffalo CEO. “General Mills will be a tremendous home for our BLUE brand as our talented team of over 1,700 ‘Buffs’ joins this new extended family. From the first meeting Jeff and I had, I felt a strong cultural fit between our two companies and believe they will be a great partner in our mission to reach more pet parents and feed more pets. This transaction creates significant, immediate value for our shareholders, as it recognizes the strength of our competitively advantaged business model. Along with our leadership team, we look forward to working with General Mills to continue growing the BLUE brand for many years to come.”
 
The $30 billion U.S. pet food market is generating consistent 3-4% growth and is highly attractive for retailers based on continued market growth, premiumization and subscription-like purchase patterns that drive traffic and repeat purchases. Blue Buffalo is the leader in the fastest-growing Wholesome Natural category with double-digit growth over each of the last three years. The Wholesome Natural market represents approximately 10% of the pet food market in volume and approximately 20% in value, according to Nielsen, Profitero, and management estimates. Based on the strong consumer tailwinds, the Wholesome Natural market is poised to continue to grow, propelling BLUE’s growth.
 
Blue Buffalo has built a loyal consumer base, particularly amongst millennials, and is well positioned to capitalize on the pet humanization and the pet food premiumization trends, which are poised to continue for the foreseeable future. With all its success, BLUE still feeds only 3% of pets in the U.S. and has significant opportunities to convert more pets to BLUE.
 
BLUE is the #1 pet food brand in the pet specialty channel at approximately twice the size of the next largest brand. BLUE is also the #1 pet food brand in the rapidly growing E-Commerce channel, where Blue Buffalo generated over $250 million of net revenues in 2017 growing over 75% versus prior year.
 
General Mills expects to maintain Blue Buffalo’s Wilton, CT, headquarters and its Joplin, MO, and Richmond, IN, manufacturing and R&D facilities. Blue Buffalo’s CEO, Billy Bishop, will continue to lead the business and report to Jeff Harmening.