Diageo sells $1.3 billion worth of General Mills Shares

25/08/05 General Mills Inc.'s largest shareholder, Diageo agreed to sell almost $1.3 billion of the cereal maker's shares to investment bank Lehman Brothers Holdings Inc. to concentrate on its global liquor business.

Diageo and Lehman Brothers International (Europe) have entered into a put option agreement under which Diageo purchased European-style put options exercisable beginning 4 November 2005, covering 25 million shares of common stock of General Mills from Lehman Brothers. Under this agreement, Diageo has the option to sell all of its remaining 25 million shares of common stock of General Mills to Lehman Brothers for settlement over five business days between 4 and 10 November 2005, for the exercise price of $51.56 per share.

Diageo will continue to retain the rights to ordinary dividends while it remains an owner of the General Mills shares. Diageo said that coming as it does less than two months after the refinancing of Burger King, Diageo is now fully focused on its position as the world's leading premium drinks company'.

The premium to be paid by Diageo for the put options is $5.56 per share, payable at the time of settlement. While the sale of these shares is subject to market conditions and contractual restrictions, Diageo is committed to the disposal of its holdings in General Mills and previously sold in 2002 call options to General Mills for a premium of $3.07 per share. Diageo views this transaction as an effective hedge for the disposal proceeds of its remaining stake in General Mills.