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Lehman $750 million exchangeable into General Mills talked at 6.25%-6.75%, up 18%-22%
By Ronda Fears
Nashville, Oct. 4 - Lehman Brothers Inc. launched before the market opened Monday $750 million of three-year mandatory exchangeables, convertible into General Mills Inc., talked to pay a 6.25% to 6.75% dividend with an 18% to 22% initial conversion premium.
Lehman is bookrunner of the quick-sale deal, which was slated to price after Monday's close. Co-managers are Citigroup Global Markets Inc., Merrill Lynch & Co. and Morgan Stanley & Co. Inc.
The issue is non-callable and has a par of $25.
General Mills common stock pays a common dividend yield of 2.74%.
Concurrently with the mandatory sale, Diageo plc is selling 33.4 millions shares of General Mills via Citigroup Global Markets Inc., Merrill Lynch & Co., Morgan Stanley & Co. Inc. and Lehman Brothers.
General Mills is selling to a Lehman affiliate a $750 million note exchangeable into the class B preferred interests in General Mills Cereals LLC, an existing, consolidated General Mills subsidiary, and plans to use those proceeds to repurchase about 16.5 million shares, at Friday's closing price, of its stock from Diageo plc. Any remaining proceeds will be used to repay debt.
Prior to the transactions, Diageo held about 79 million shares of General Mills stock received when General Mills purchased the worldwide Pillsbury operations from Diageo in October 2001.
In October 2002, General Mills sold $1.35 billion of 0% convertible bonds, with those proceeds earmarked to partially repay $4 billion of commercial paper borrowings to help fund the $10.4 billion purchase of Pillsbury. In a separate transaction at that time, General Mills bought a three-year call option from Diageo on 26.2 million shares at $3.07 per share, or $80.4 million, with a strike price of $51.56.
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