General Mills Inc. announced that it will sell to an affiliate of Lehman Brothers $835 million of Class B preferred interests in General Mills Cereals LLC, an existing, consolidated General Mills subsidiary. These preferred interests will be reflected as minority interests on General Mills' consolidated balance sheets. General Mills may initially sell to the Lehman affiliate a $750 million note that would then be exchanged into the Class B preferred interests, in which case the Lehman affiliate would purchase the additional $85 million of preferred interests for cash at the time of the exchange.
General Mills plans to use all or part of the proceeds from this transaction to repurchase approximately 16.5 million shares of its common stock from Diageo plc, and any remaining proceeds will be used to repay General Mills debt. This share repurchase will be made in conjunction with Diageo's plan to sell approximately 33.4 million additional shares of General Mills stock in an underwritten public offering. Diageo currently holds approximately 79 million General Mills common shares, which it received when General Mills purchased the worldwide Pillsbury operations from Diageo in October 2001.