Statement of
Commissioners Orson Swindle and Thomas B. Leary

in General Mills, Inc./Diageo plc/Pillsbury Co.
File No. 001-0213

For approximately 15 months, the Commission has been investigating the proposed acquisition by General Mills, Inc. of certain food businesses of the Pillsbury Company, a subsidiary of Diageo plc., and the related divestiture of certain assets to International Multifoods Corporation ("Multifoods"). The transaction clearly created competitive problems in those markets where the number of significant competitors was reduced from three to two or two to one. The parties' proposed remedy, however, presented complex and difficult issues, which have given rise to honest differences of opinion.

The outcome of our deliberations today is that the parties will be able to proceed with a significant transaction that is, for the most part, competitively benign. At the same time, we believe that adequate measures have been taken to preserve competition and avoid potential consumer harm in the relatively narrow product areas that would otherwise be adversely affected.

From the beginning, General Mills has recognized that there were serious antitrust issues involving about eight percent of the Pillsbury assets to be acquired. It initially offered a settlement proposal that provided for divestiture of Pillsbury's baking mixes, ready-to-spread frosting, flour products, pancake and potato mixes to Multifoods. With such a divestiture, General Mills would not acquire any competitively problematic products. Along with our colleagues, however, we continued to be concerned that the proposed divestiture package might not sufficiently assure that the pre-transaction level of competition would be maintained, and we were concerned that the divestiture proposal would necessitate undesirable ongoing communications between General Mills and Multifoods.

The parties to the transaction have recently offered substantial commitments, in addition to those offered before, which will in our view minimize these risks. Accordingly, we believe the transaction is now consistent with the public interest, and have voted against the motion to seek judicial relief to enjoin it. The motion has failed by a two-two vote, with Chairman Muris recused.

The following highlights the far-reaching commitments that the parties ultimately made, which we believe are adequate to protect competition.

1. The parties will sell the divested Pillsbury assets for a price of $316 million. We had reason to believe that this was a favorable price, even for the assets mentioned above, but within the last week, the parties have offered to divest five additional product lines to Multifoods (Pet Milk, Farmhouse Foods, Softasilk Flour, Red Band Flour and La Pina Flour) at no additional cost. All overlap products will be divested and the additional product lines should help Multifoods to achieve efficiencies of scope.
2. In order to further enhance the financial strength of Multifoods, Pillsbury's parent company, Diageo, will guarantee up to $200 million long-term debt of Multifoods to finance the purchase, with a commitment that Diageo will not directly or indirectly influence Multifoods's business decisions. Further, General Mills and Diageo will put $10 million in escrow that could be used to finance a direct sales force, should Multifoods choose that course, or to meet unforeseen contingencies in the businesses that Multifoods is acquiring.
3. The Pillsbury plant in Murfreesboro, Tennessee, produces most of the divested products manufactured by Pillsbury, but it also produces other Pillsbury products. General Mills will not turn over the Murfreesboro plant to Multifoods, but will rather convert a more up-to-date facility in Toledo, Ohio, that Multifoods preferred. This conversion process, undertaken at General Mills' expense, will be accompanied by cost and quality guarantees and subject to the oversight of an independent trustee.
4. General Mills will license Multifoods the use the Pillsbury trademarks it will acquire in the acquisition, including the well-known "Doughboy" - an important marketing asset. So-called brand splits of this kind can raise potential problems, although the Commission has approved, indeed mandated splits in other transactions like Exxon/Mobil. In order to minimize these problems, the license involved here will grant broad discretion to Multifoods in its use of the marks, subject only to the minimum obligations imposed by trademark law, and will provide for third-party arbitration of disputes, in order to avoid ongoing business negotiations between General Mills and Multifoods -- entities that will be competitors.

We would have strongly preferred that these commitments be memorialized in a formal Commission order, consistent with usual practice. Imposition of an order, however, would require an affirmative vote of at least three Commissioners in this situation, and a third vote could not be obtained. On the other hand, the alternative of asking a court to block the overall transaction would not, in our view, serve the public interest. As indicated above, we recognize that there are hard issues in this case and, even though we differ, we respect our colleagues' view that the present settlement is inadequate. We regret that they could not have found a way to assert that view but still vote to include the commitments in an order that the agency can enforce.

Having voiced this regret, we are nevertheless convinced that the parties will honor the letter and the spirit of their promises. Order or no order, we have a variety of enforcement tools at our disposal - including a plenary action to undo the underlying merger transaction - in the extremely unlikely event that the parties renege.