By Chelsey Dulaney

General Mills Inc. has agreed to sell its Green Giant and Le Sueur frozen and canned vegetable brands to B&G Foods Inc. for $765 million in cash.

B&G, which owns food brands like Molly McButter cheese flavoring and Pirate's Booty rice-and-corn puffs, also expects $137 million in tax benefits from the deal.

Shares of B&G added 1.8% to $31 a share in premkaret trading, while General Mills shares were inactive.

General Mills said it plans to use proceeds from the sale to fund share buybacks and to reduce its debt.

The sale comes as General Mills, the maker of brands including Cheerios cereal and Hamburger Helper, struggles with changing consumer tastes and a strong dollar. The Minneapolis-based company has been cutting jobs and closing plants as it struggles with Americans' growing aversion to packaged foods.

General Mills said it is working to focus its resources on the brands and markets that have the greatest growth potential.

During the quarter that ended in May, General Mills took a $260 million charge to write down the value of the Green Giant brand by 13%. At the the time, General Mills pegged the carrying value of the brand at $425.9 million. The company said it redirected resources away from supporting Green Giant, which caused it to review the business and determine it wasn't worth what it once was.

General Mills said it would continue to operate Green Giant in Europe and other export markets under license from B&G. The company expects the deal to dilute earnings for the year ending next May by 5 cents to 7 cents a share.

For B&G's part, the deal will add significantly to its sales and earnings and give it a foothold in the frozen-food market. After a transition period, the brands are expected to add $550 million to B&G's net sales and 60 cents a share to its earnings. For its 2014 fiscal year, B&G reported net sales of $848 million, up 17% from the prior year, while per-share earnings fell to 76 cents from 98 cents on big impairment charge.

The deal is expected to close in the fourth quarter.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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(END) Dow Jones Newswires

September 03, 2015 09:25 ET (13:25 GMT)

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