Cereal packet

5 October 2004

The UK drinks group is piling up cash even as its liabilities are set to fall. All this paves the way for increased share buybacks.

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Diageo, the UK drinks group, raised $2.3bn (£1.3bn) on Tuesday by selling 50m of its shares in General Mills at a price of $45.20 per share.

The group sold 33m shares via an underwritten secondary offering and sold the balance back to General Mills itself. It received 134m shares in the US food business as part of the consideration for selling its Pillsbury business to General Mills.

Diageo continues to hold 25m General Mills shares. It has transferred a further 4m shares to its UK pension plan. This will reduce the plan's aftertax deficit, which at end June stood at £750m, by £100m.

Diageo said it would make an announcement about the future capital structure of the company after consulting with its board.

Citigroup, Merrill Lynch, Morgan Stanley and Lehman Brothers worked on the share sale. UBS acted as financial adviser to Diageo.

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