MINNEAPOLIS (AP) -- Government and business leaders in the Twin Cities reacted favorably to General Mills' announcement that it's buying Pillsbury, while several securities analysts praised the deal as a good long-term move.
Mayor Sharon Sayles Belton was particularly enthusiastic, citing General Mills' long-standing philanthropic commitment.
''I think General Mills is a fabulous Minnesota-based company and they've got strong ties to this community,'' she said.
The mayor said she's been assured the merged company will maintain a strong presence for the foreseeable future in downtown Minneapolis, where Pillsbury is based, in part because General Mills told her there isn't room for more employees at its Golden Valley headquarters.
''I think there may be some changes after the dust settles, but when it will do that remains to be seen,'' Sayles Belton said. ''Over time, this is going to continue to be a strong Minnesota company with a good base of employees in our community.''
John Wodele, Gov. Jesse Ventura's spokesman, said General Mills chief executive Steve Sanger briefed the governor on the deal Monday, and Ventura ''was pleased they were able to keep Pillsbury in Minnesota. He respected that this was a business decision, but by all appearances it is a very favorable one for Minnesota.''
Tom Stinson, Minnesota state economist, said the deal is ''good news'' because it apparently will ''take two Twin Cities corporate good citizens out of play for future mergers for some time,'' since the combined company will be too big for most companies to swallow in an unfriendly takeover.
''It's a lot better news than learning two years from now that General Mills would be bought and the headquarters were being moved to Chicago or Omaha,'' Stinson said.
David Kidwell, dean of the Carlson School of Management at the University of Minnesota, called the merger ''pretty significant and extremely positive'' for the Twin Cities and for both companies. Kidwell predicted that after an initial headquarters consolidation, the Twin Cities could end up with even more jobs as a result of the merger.
''General Mills is pretty lean and mean and well focused,'' he said. ''I think Pillsbury will blossom moving away from European management.''
Pillsbury's London-based parent company, Diageo PLC, the world's largest liquor company, has been under pressure to get rid of its slower-growth food holdings.
A Monday meeting between securities analysts and General Mills officials yielded no surprises, said David Nelson, who follows the company for Credit Suisse First Boston in New York City. Although Nelson is optimistic about the integration of the two corporate cultures, he said General Mills has a lot of work to do.
There has been a lack of innovation at Pillsbury that contributed to a 2 percent drop in sales in the year ending June 30, Nelson said. To turn that around, General Mills will need to invest in Pillsbury brands, he said.
''Good products and good marketing don't come cheap,'' Nelson said.
To acquire Pillsbury, General Mills is more than doubling its debt load and issuing a huge block of new stock to Diageo. Those moves are expected to reduce its earnings per share by 20 percent this fiscal year, rather than the 5 to 10 percent many observers had expected earlier. The acquisition will saddle General Mills with more than $5 billion in Pillsbury debt.
General Mills shareholders ''will need Diageo's stiffest drink'' to cope with the news, quipped Prudential Securities analyst John McMillin.
But even as General Mills stock dropped $1.31 Monday to $35 a share, McMillin and other analysts remained bullish on the $10.1 billion deal.
Sanger ''made himself the king of Minneapolis food (Monday),'' McMillin said. ''I think in time he will make himself a king to shareholders.''
U.S. Bancorp Piper Jaffray's George Dahlman added: ''You have to take your hat off to Steve Sanger. In the long term, it's in General Mills' best interests.''
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