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Updated from 1:18 p.m. EDT

General Mills

(GIS) - Get General Mills, Inc. Report

is buying control of


(DEO) - Get Diageo Plc Report


in a stock-for-stock deal worth $10.2 billion. The acquisition creates the world's fourth-largest food company and nearly doubles the size of General Mills.

According to a company release, General Mills will issue 141 million new shares of common stock to Diageo and will take on $5.1 billion of Pillsbury debt. Diageo will be barred from acquiring additional shares for 20 years or until its stake in General Mills falls to less than 5%. The merger is expected to close by the end of the year and is likely to result in job losses at both companies, though officials said it is too soon to say how many.

The deal would give General Mills and Pillsbury control of most of the baking-mix market, making it necessary for General Mills to divest itself of Pillsbury dessert mixes holdings and Pillsbury's Green Giant canned vegetables unit because of overlapping business.

Lehman Brothers


agreed to acquire the high-net-worth retail brokerage operations of

SG Cowen

, a unit of French bank

Societe Generale

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TheStreet Recommends


Dow Jones News Service

reported that both parties declined to disclose terms, but people familiar with the matter said the purchase price is higher than $50 million, a figure that was previously reported. The report said a big part of the price is a bonus pool set aside to retain key brokers.

General Electric

(GE) - Get General Electric Company Report

said it entered a $342 million stock deal to buy

Harmon Industries


, a railroad equipment maker. General Electric said it would issue $30 of GE stock for each share of Harmon, more than a 100% premium over Harmon's Friday closing price of 13 3/16. General Electric said that including debt, the deal is valued at $425 million. Prior to the acquisition, GE joined



in a venture called

GE Harris Railway Electronics


Mergers, acquisitions and joint ventures


(AES) - Get AES Corporation Report

, an energy company, agreed to buy utility

Ipalco Enterprises


in a deal valued at $2.15 billion, reported

The Wall Street Journal

. AES will also take on $890 million in debt.



, a drug company, said it entered a $444 million stock deal to purchase



, which makes cancer pain remedies. The terms call for Anesta shareholders to receive 0.4765 share of Cephalon for each share of Anesta they own. The deal values Anesta at $31.45 a share, based on the $66 closing price of Cephalon on Friday.

Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

has taken a $100 million stake in

Liberate Technologies

(LBRT) - Get Liberty Oilfield Services Inc. Class A Report

. The investment would give Cisco a 3.8% interest in Liberate, which makes interactive television software. The two companies would jointly market their services to network operators.



said it has entered a cash and stock deal to acquire

Fort James


for $11 billion. The terms call for Georgia-Pacific, a forest products processor, to pay $29.60 in cash for each share of the paper maker, an exchange of 0.2644 share for each share of Fort James. Georgia-Pacific will also take on $3.5 billion of Fort James' net debt. The merger will make Georgia-Pacific the world's biggest tissue products maker with combined revenue of more than $24.8 billion.

Also, Georgia Pacific announced its second-quarter earnings of $1.20 a share, beating the 11-analyst estimate of $1.16 and in line with year-ago earnings.

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Earnings/revenue reports and previews

SLM Holding

(SLM) - Get SLM Corp Report

, the parent company of student-loan fund provider Sallie Mae, said second-quarter earnings on a core-cash basis, which measures only recurring earnings, were 70 cents a share, up from the year-ago earnings of 58 cents a share. A seven-analyst estimate had expected earnings of 68 cents a share. Second-quarter net income was 73 cents a share, compared to year-ago income of 76 cents a share.

Bank of New York

(BK) - Get Bank of New York Mellon Corporation Report

posted second-quarter earnings of 48 cents a share, a penny better than the 21-analyst estimate and up from the year-ago 42-cent profit.


(GLW) - Get Corning Inc Report

posted second-quarter earnings of 94 cents a share, topping the 11-analyst estimate of 80 cents and up from the year-ago 52-cent profit. The fiber optic company attributed the strong results to robust fiber optic cable sales and flat-panel display glass.



U.S. division was instructed to improve its bottom line by $2 billion by the end of the year, reported

The Wall Street Journal

. The auto giant said it would make the changes mostly through cost cutting. According to the


, DaimlerChrysler said it would also roll out enhanced Web sites.

Internet healthcare company


warned that its greater-than-expected second-quarter loss would miss analyst estimates and that its two top executives resigned voluntarily.



posted second-quarter earnings of 22 cents a share, greatly missing the four-analyst estimate of 31 cents and down from the year-ago 28-cent profit. The commercial printing company blamed pricing pressure in its envelope unit and higher interest charges for the shortfall.

Separately, Mail-Well said it would sell its


coating and laminating division to

Cravey, Green & Wahlen

, a private equity firm, for $100 million and said it would use the proceeds to repurchase $10 million in common stock.



warned investors that it would post second-quarter earnings of about 4 cents a share, greatly missing the 10-analyst estimate of an 8-cent profit. The software-maker cited increased sales and marketing costs as the culprit.

Rohm & Haas


said it expects second-quarter earnings close to 42 cents a share, excluding items. The number is far below the 13-analyst estimate of 55 cents, but up from the year-ago loss of 6 cents. The company attributed the missed earnings to high material and energy costs and a tough pricing environment.

Silicon Image


reported second-quarter earnings of 5 cents a share, beating the five-analyst estimate of 2 cents and up from the year-ago loss of 13 cents. The figure excludes stock compensation and warrant expense. The company also reported that its board had approved a 2-for-1 stock split.

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Offerings and stock actions

Vodafone Airtouch

(VOD) - Get Vodafone Group Plc Report

said it plans an IPO for up to 49.9% of its unit


shares, reported

The Wall Street Journal

. The offering is expected to raise between $3.7 billion and $5.6 billion.

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Analyst actions

Donaldson Lufkin & Jenrette

said that


(PFE) - Get Pfizer Inc. Report

would replace

King Pharma


on its

Growth and Focus

list, while


(AGN) - Get Allergan plc Report

will replace



on the list.


Affiliated Computer


: UP to recommended list from purchase list at

Goldman Sachs


Canadian National Railroad

(CNI) - Get Canadian National Railway Company Report

: UP to market performer from buy at DLJ.

Host Marriott


: UP to attractive from neutral at


; price target UP to 11.50 from 10.50.



: UP to recommended list from purchase list at Goldman Sachs.




: DOWN to attractive from buy at PaineWebber.

Public Service Enterprise

(PEG) - Get Public Service Enterprise Group Inc Report

: DOWN to outperform from buy at

ABN Amro



Anadarko Petroleum

(APC) - Get Anadarko Petroleum Corporation Report

: NEW strong buy at

Credit Suisse First Boston




: NEW buy at Donaldson Lufkin & Jenrette, price target: 55; NEW buy at CSFB; strong buy at

US Bancorp

; price target: 90.

National Financial Services


: NEW outperform at

Lehman Brothers

; price target: 49.



: NEW buy at

J.P. Morgan

; price target: 32.

Group Moves

Lehman Brothers upgraded several health management companies:

  • Health Management (HMA) : UP to buy from neutral.
  • Humana (HUM) - Get Humana Inc. Report: UP to outperform from neutral; price target: UP to 9.50 from 8.
  • Wellpoint Health (WLP) : UP to buy from outperform; price target: UP to 95 from 90.

Donaldson Lufkin & Jenrette upgraded several railroad stocks:

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America Online


said it has agreed to offer some of its services through

AT&T Wireless Services


. According to the terms, AT&T Wireless'

Digital PocketNet

wireless users will have access AOL's email, news, weather and stock quote services, while MovieFone's local movie listings would be free through AT&T Wireless' Internet-ready phones as part of the AT&T Digital PocketNet basic service plan.


(MSFT) - Get Microsoft Corporation Report

said that it has beat out

America Online





as the most widely used network of Web sites, with 201 million users of its services, reported in

The Wall Street Journal



(QCOM) - Get Qualcomm Inc Report

said Japanese and European patent offices have maintained three of the company's patents that protect key features of its CDMA technology. The Japanese Patent Office upheld Qualcomm's first CDMA patent, rejecting claims from


(NOK) - Get Nokia Oyj Report





Nippon Telegraph and Telephone


. Meanwhile, the

European Patent Office

maintained a patent covering technology that boosts capacity in communication systems and another that protects a part that allows users to monitor audibly a fax or modem connection over a digital channel.



said it enlarged its international services. The long-distance company said it would expand its frame relay service to 45 countries and increase its ATM presence in 23 countries.

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