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Jobs to be lost in wake of General Mills-Pillsbury marriage
By Andrew Haeg
Minnesota Public Radio
November 1, 2001

General Mills and Pillsbury are finally merging after months of delay. The $10.4 billion deal brings together two neighbors and longtime rivals. Their now-shared goal is to become a fast-growing food industry leader.

General Mills CEO Steven Sanger opens trading on the New York Stock Exchange Thursday.
(Photo courtesy of General Mills)

It was almost 16 months ago that General Mills first announced it would buy Pillsbury. The Federal Trade Commission delayed its approval because of concerns that merger would hurt competition in the food industry. The FTC finally dropped its opposition to the deal last week.

News that the deal finally closed brought relief to employees at Pillsbury.

"We thought everything was going to happen in January. And then it turned out to be summer. I think we had a lot of emotions and a lot of ups and downs. And so we're going to be able to focus all that energy into building a better company," said Ralph Pavik, who has worked at Pillsbury for three-and-a-half years.

Julie McDaniel, a six-year Pillsbury veteran, said "it was a long 16 months, (but) I think it allowed us to continue to grow as our own companies and think about how we're going to be a really good combined company."

The long wait has had other benefits according to General Mills spokesman Tom Forsythe. "During this extended review, we have had actually a number of jobs become vacant; around 800 to in the Twin Cities alone. That will mean that far fewer people will be displaced as a result," he said.

Even so, Forsythe says General Mills will lay off as many as 300 Twin Cities employees. The number could total 1,000 companywide.

The acquisition will roughly double the size of General Mills. The combined company will have annual sales of about $13 billion. It employs 27,000 people, 5,000 of them in Minnesota.

Prudential Securities analyst John McMillin says General Mills desire to grow was among the most important drivers of this merger. He says General Mills had to keep pace with a changing food industry.

"Companies like Kraft are getting bigger. Companies like Nestle are getting bigger. Their customers are getting bigger. The world requires bigger suppliers. And General Mills couldn't just sit still," according to McMillin.

The deal will combine the two companies' portfolios of well-known brands. Pillsbury's include refrigerated dough products and Green Giant vegetables. General Mills has Big G cereals and Yoplait yogurt.

The deal will also quadruple General Mills sales of products made especially for restaurants, known as the food-service market.

Prudential Analyst John McMillin says the two companies have complementary strengths. "General Mills has a terribly creative marketing approach and they'll clearly add that to some of Pillsbury's businesses. But Pillsbury has some expertise as well. Their food-service business has really been the envy of the industry. And I think they, hopefully, can teach General Mills a few things as well," he said.

The now completed merger brings control of Pillsbury back to the Twin Cities. Former owner Diageo is based in London. It could also boost the amount of money that General Mills gives to the community. Currently General Mills policy is to donate three percent of pre-tax profits to charity, although it often gives more.

Company officials can't say yet for certain, but they may extend that policy to Pillsbury's portion of the new company's profits.

Dave Biemesderfer, a spokesman for the Council on Foundations in Minneapolis, says he's confident General Mills will become an even more prominent charitable donor. "They have for a long time been the number-two corporate giver consistently of any company based in Minnesota. So you can count on them to make sure that when these companies merge that the giving of the companies results in a benefit for the community," he said.

One example: General Mills matches employees contributions to the United Way.

Spokesperson Tom Forsythe says the company will extend that policy to employees acquired from Pillsbury, but he says it will take some time.

General Mills says it plans to continue renting space in Pillsbury's downtown Minneapolis headquarters.

But over time, company officials expect to bring most Twin Cities employees to the General Mills campus in Golden Valley.