Pillsbury, General Mills in Talks to Combine

Britain’s Diageo, owner of Burger King and Guinness beer, is in talks to combine its Pillsbury food business with General Mills Inc. in an expected $10.5-billion share swap with the U.S. cereal maker, the companies said. A deal, which would mark the latest step in a rapid consolidation of the food industry, would leave Diageo with a 30% to 40% stake in enlarged General Mills, according to sources close to the situation. The news also comes just weeks after Diageo said it would spin off Burger King, the No. 2 fast-food restaurant chain behind McDonald’s Corp. As the two sides engage in talks, other possible bidders could emerge, analysts said, namely ketchup king H.J. Heinz Co., which has publicly expressed its intention in recent weeks to participate in the industry consolidation. A combination of Pillsbury, known for its chubby-cheeked Doughboy character, and General Mills, maker of Wheaties and Cheerios cereals, may be complete as early as next week, said sources close to the talks. Both companies are based in Minneapolis. General Mills shares rose 25 cents to close at $37 on the NYSE.