On Wednesday, May 6th at 11:00am EST we will be hosting a Black Book conference call on General Mills. Dial-in details and associated materials to follow.
We have a positive bias to GIS and will be adding it to the Hedgeye Best Ideas list as a LONG. The call will be a detail look at the company and what can be done to improve the overall performance of the company.
We break down the 90 page presentation into three key points:
GIS NEEDS TO BE REINVENTED!
The opportunity to create significant shareholder value from repositioning the company is significant. The recent performance suggests that management may be too stuck in the past to reshape the company in a way that will accelerate top line growth. There have been a number of events over the past few years that suggest the timing is optimal for an activist to come on and re-shape management and the board.
MANY WAYS TO WIN
GIS has done a lot of things to stave off an activist attack, but it will all be for nothing if they do not execute on their growth plan. GIS is a great company with strong brands, but its business practices and backward looking are insular. Reshaping the portfolio of brands, CPW and G&A cuts are just some of the ways to create significant shareholder value.
GIS needs to reshape the company to stay as a premier global food company. Alternatively, GIS would make a solid acquisition target, especially for a large consumer snack food company. GIS needs to accelerate its growth and management is struggling to do it internally. In our view, selling the company would be an ideal scenario for all stakeholders. Or reinvent the company through meaningful acquisitions and divestitures.
We are cognizant of the fact that GIS is trading at a premium valuation and speculation is rampant that the company may be in play. We agree the company is in play and it's just a matter of time before the intrinsic value of the company is realized.
The call will last about an hour including time for Q&A.