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International Multifoods to Acquire Some Pillsbury, General Mills Products

International Multifoods


agreed to pay $305 million in cash to acquire several


product lines, along with

General Mills'

(GIS) - Get General Mills Inc. Report

Robin Hood flour brand in the U.S., but also projected a fourth-quarter earnings shortfall and disclosed plans to eliminate its 20-cent quarterly dividend.

The company's shares dropped sharply on the news, and closed down $3.28, or 15.2%, to $18.25 on the

New York Stock Exchange


General Mills is acquiring Pillsbury from

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, a food and beverages group based in London. The deal with International Multifoods is part of General Mills' efforts to gain

Federal Trade Commission

clearance for the Pillsbury acquisition.

International Multifoods will purchase the Pillsbury and Martha White retail dessert and baking products businesses in the U.S., the Hungry Jack branded potato mix and breakfast product lines, and certain Pillsbury-branded foodservice dessert and baking mix products. International Multifoods already owns the Robin Hood baking products business in Canada.

CIBC World Markets

has agreed to provide International Multifoods with $650 million to finance the acquisition.

International Multifoods, a food service distributor and bakery products provider based in Minnetonka, Minn., said the businesses that will be acquired have combined sales of $450 million. The company expects the acquisition to add 18 cents a share to earnings in the first full year after closing the transaction. The company also projected that the deal will add at least 25 cents to the bottom line in the second year and at least 45 cents in the third.

However, International Multifoods projected an earnings shortfall for the fourth quarter of this year, citing a continuation of higher payroll, fuel and utility costs, and expenses related to new business that the company began to serve during the quarter.

The company now expects fourth-quarter earnings of 15 cents to 18 cents a diluted share, well below both the consensus estimate of 41 cents and the earnings of 37 cents in the year-ago period. For the year ending March 3, International expects earnings of $1.16 to $1.19 a share, while analysts forecast earnings of $1.43. The company will report its fourth-quarter financial results March 28.

Earlier today, General Mills said it expected to beat Wall Street's forecast for the fiscal third quarter because the Pillsbury acquisition hasn't yet closed.