Nashville, Oct. 5 - Lehman Brothers Inc. sold $750 million of three-year non-callable mandatory exchangeables, convertible into General Mills Inc. shares, at par of 25 with a 6.25% dividend and 20% initial conversion premium via bookrunner Lehman Brothers.
The issue priced at the tight end of dividend talk of 6.25% to 6.75% and at the middle of premium guidance of 18% to 22%.
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 sold to a Lehman affiliate an $835 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.
General Mills also entered into a forward stock sale contract with Lehman for up to 16.5 million shares of stock, roughly the amount underlying the mandatory exchangeable.
Terms of the deal are:
| Issuer: | Lehman Brothers Inc.
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| Reference shares: | General Mills Inc.
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| Issue: | Mandatory exchangeable premium income equity units
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| Bookrunner: | Lehman Brothers Inc.
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| Co-managers: | Citigroup Global Markets Inc., Merrill Lynch & Co. and Morgan Stanley & Co. Inc.
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| Amount: | $750 million
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| Maturity: | Oct. 15, 2007
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| Dividend: | 6.25%
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| Price: | Par, $25
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| Yield: | 6.25%
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| Conversion premium: | 20%
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| Conversion price: | $45.20/$54.24
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| Conversion ratio: | 0.4609/0.5531
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| Call: | Non-callable
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| Price talk: | 6.25-6.75%, up 18-22%
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| Ratings: | Moody's: A1
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| S&P: A
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| Pricing date: | Oct. 4, after the close
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| Settlement date: | Oct. 8
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| Distribution: | Registered
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