New York-based investment banking firm Blaylock & Partners has revealed that its equity analysts Vernon Gatling and Scott S. Phillips have initiated coverage of General Mills with a "market outperform" rating and a 12-month price target of US$56 per common share, up approximately 22% from current levels.

General Mills' US$10.4bn acquisition of Pillsbury has transformed the company into the second largest packaged foods company in the US and the fifth largest in the world with an estimated US$9.2bn in FY02 revenue. General Mills' global brand portfolio includes: Betty Crocker, Pillsbury, Green Giant, Haagen-Dazs, Old El Paso and others.

It also has more than 100 US consumer brands, more than 30 of which each generate annual retail sales in excess of US$100m. General Mills is also a major supplier of baking and other food products to the food service and commercial baking industries.

In the bank's report, "Not Your Run of the 'Mill'," Gatling and Phillips recommend the purchase of common shares of General Mills for the following reasons:

* The Pillsbury acquisition has strengthened General Mills' international presence by adding approximately US$1.2bn in sales outside the US. Pro forma the Pillsbury acquisition, the international arm grew approximately 10 % year-over-year in FY01;

* Pillsbury's brands add market leadership positions in categories General Mills did not participate in prior to the acquisition. As a result of that and General Mills' concentration on expanding distribution channels outside of traditional stores, the company's bakery and food services segment should see significant growth going forward;

* With the acquisition, General Mills holds leading market positions in six categories that are over US$1bn in size with strong brands. It also has more than 100 US consumer brands, more than 30 of which each generate annual retail sales in excess of US$100m;

* Successful product innovation: Providing products that deliver convenience, good taste and health benefits that enable food companies to stay in front of the "convenience and wellness" trend demanded by consumers;

* The expectation that earnings per share should grow at a compounded annual growth rate of approximately 15% through FY04, compared to the industry average of about 9-10%; and

* General Mills' standing as a "defensive stock" - a company with a strong balance sheet, more tangible assets and the ability to withstand a downturn in the overall market - positions it to benefit from a flight to quality in the current stock market environment.