General Mills’ offer price of $40 per Blue Buffalo share represents a premium of 17.2 percent to Blue Buffalo’s Thursday closing price.
Blue Buffalo’s shares surged more than 15 percent in premarket trading.
General Mills said it expects to finance the transaction with debt and cash on hand, along with approximately $1 billion in equity. The company expects the deal to close by the end of 2018.
The deal, which marks Minneapolis-based General Mills’ entry into the pet food business, will also help the company offset intensifying competition in the packaged food industry.
General Mills said the deal would make it the leader in the U.S. wholesome natural pet food category, the fastest growing category in the pet food market.
The acquisition will boost General Mills’ net sales and profit margins. The deal is expected to be neutral to the company’s cash earnings per share in fiscal year 2019 and will add to earnings in fiscal year 2020.
—Reuters contributed to this report.