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General Mills gets into pet food with Blue Buffalo acquisition

Global food company looks to diversify portfolio as revenue continually declines

The maker of Cheerios also wants to fill dog bowls.

General Mills said Friday that it plans to buy high-end pet food maker Blue Buffalo for $8 billion. It joins other food makers in the pet business: Fruit-spread maker The J.M. Smucker Co., for example, owns Kibbles 'n Bits and Meow Mix

The deal is also a way for General Mills to further diversify its business as more people seek less-processed foods, even for their furry friends.

"We've been serving all family members" for years, said General Mills CEO Jeff Harmening. "And pets are part of the family."

General Mills, whose revenue has fallen for three straight years, has been buying up food brands with fewer artificial ingredients as it deals with dwindling demand for its cereals and yogurt. In recent years, it bought Annie's organic snacks and Epic meat bars made from bison, wild boar or lamb. The Minneapolis-based also makes Pillsbury dough, Yoplait yogurt and Lucky Charms cereal.

Blue Buffalo says its dog and cat foods are free of artificial colours and contain fruits and vegetables. It had nearly $1.3 billion in net sales last year and General Mills sees consistent growth of between 3% and 4% in the $30 billion pet food market.

READ: Perfecting the pet aisle

"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 chairman and CEO Jeff Harmening in a company release.

General Mills has suffered three consecutive years of declining revenue as it follows customers seeking more fresh food on the dinner table.

As it transitions to accommodate changing tastes, General Mills said the Blue Buffalo acquisition would become accretive by fiscal 2020.

Once the deal closes, Blue Buffalo will be run as a new pet operating segment, General Mills said, and it would continue to operate out of its Wilton, Connecticut headquarters.

The acquisition is targeted to close by the end of General Mills' fiscal year 2018.

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