Doughboy Custody Fight Stalls Acquisition

General Mills Inc. and U.S. regulators are at odds over custody of the Pillsbury Doughboy, delaying the cereal maker’s $10.5-billion acquisition of Pillsbury from Diageo of Britain, people familiar with the review said.

General Mills’ offer to sell baking mixes marketed under the Doughboy label has raised concerns at the Federal Trade Commission that splitting the brand would diminish competition, people said.

Under a proposed $305-million divestiture, the blue-eyed Doughboy that has been a symbol of Pillsbury products since 1965 would become a mascot for two companies.

International Multifoods Corp., the largest U.S. distributor of vending-machine food, would share the trademark if the divestiture is approved.

General Mills, maker of competing Betty Crocker products, would continue to use the Doughboy brand to sell such frozen breakfast foods as pancakes and waffles and refrigerated tubes of dough for cookies, biscuits and sweet rolls.

The proposed divestiture, announced in February, calls for General Mills to license the trademark to International Multifoods for use in marketing the Pillsbury cake, cookie and muffin mixes as well as canned frosting.

Federal Trade Commission lawyers who are questioning the deal are weighing whether to force General Mills to give up the Doughboy trademark entirely, sources said.

General Mills’ shares fell 76 cents to $43.70 on the New York Stock Exchange. Diageo’s American depositary receipts fell 85 cents to $40.15, also on the NYSE.