Critical Analysis Paper

-Please Refer To Important Disclosures On The Last Page Of This Report-

G.research, LLC One Corporate Center Rye, NY 10580-1422 Tel (914) 921-5150 www.gabellisecurities.com

September 21, 2017

General Mills, Inc. Earnings Model 2016 - 2022P

Fiscal year end 5/31 2016 2017 2018E 2019P 2020P 2021P 2022P CAGR ($ in millions, except per share) '17-'22P Revenue 16,563$ 15,620$ 15,592$ 15,770$ 16,038$ 16,313$ 16,595$ 1.2 % % Growth -6.1% -5.7% -0.2% 1.1% 1.7% 1.7% 1.7% `

EBITDA 3,392 3,438 3,391 3,468 3,580 3,698 3,823 2.1 Margin 20.5% 22.0% 21.7% 22.0% 22.3% 22.7% 23.0%

EPS, cont ops 2.92$ 3.07$ 3.10$ 3.25$ 3.40$ 3.60$ 3.85$ 4.5 % Growth 2.2% 5.3% 1.4% 4.2% 5.3% 5.8% 5.7%

TEV/EBITDA Multiple 11.7x 11.6x 11.7x 11.5x 11.1x 10.7x 10.4x P/E Multiple 17.9 17.0 16.7 16.1 15.2 14.4 13.6

Source: Company data and Gabelli & Company estimates.

General Mills, Inc. (GIS - $52.17 - NYSE) 1Q Stumbles FYE: 5/31 EPS P/E PMV 2020P $3.40 15.2x $74 Dividend: $1.96 Current Return: 3.8% 2019P 3.25 16.1 70 Shares O/S: 568.3 million 2018E 3.10 16.7 67 52-Week Range: $65.57 - $50.40 2017A 3.07 17.0 --

COMPANY OVERVIEW General Mills is a leading producer of packaged foods based in Minneapolis, MN. Its diverse portfolio includes leading brands, such as Cheerios, Yoplait yogurt, Pillsbury refrigerated dough, Betty Crocker baked goods, Nature Valley snack bars and Progresso soup. GIS also owns a 51% stake in Yoplait SAS and 50% stakes in two major unconsolidated joint ventures, Cereal Partners Worldwide (CPW) and the Haagen-Dazs in Japan.

Reason For Comment: GIS reported disappointing results for 1Q results ended August, despite stronger takeaway trends during the quarter. The full year guidance was reiterated; however, a soft 1H underscores the reliance of 2H contributions to achieve 1-2% EPS growth.

x Revenue of $3.8 billion, -4%, as volume declined 4%.

x Adjusted earnings $0.71 vs. $0.78 per share as gross profit and operating margins contracted to 35.1% and 17.1%, respectively.

x NA Retail: Revenue $2.4 billion, -5%, as volume declined 3%. Growth across center-store food remains challenging as sales declined across Cereal -7%, Yogurt -22% and US Snacks -2%, while Baking & Meals flat and Canada -2%. Cereal was surprising given the recent positive comments from a broker-sponsored conference where management reaffirmed expectations for global cereal growth; however, during 1Q shipments were materially lower than retail takeaway which declined only -1% across measured channels. Management attributed this to inventory destocking following the build last quarter in advance of a merchandising event and timing of trade accruals. We anticipate cereal to improve going forward, as well as improvement across some of its seasonal businesses as we enter the holiday season, particularly across soup. Operating profit declined to $533 million.

x Convenience stores & Foodservice: Revenue was flat at $447 million, while profits declined to $85 million as sales from the focus platforms declined 1%.

x International (combined new segments): Revenue declined 2% to $884 million, as sharp declines across Asia & LatAm segment offset 3% growth in Europe & Australia. Profit margins remain significantly below the corporate average and its competitors in these markets representing an opportunity for long-term improvement.

x Management 2018 guidance (constant currency) for the fiscal year ending May 2018: revenue down 1-2%, segment operating profit flat to +1% and EPS growth of 1-2%, as additional share repurchases compensate for the lower sales and profits. The weakness in the US dollar should give management some flexibility to achieve this guidance.

Investment Case General Mills is focused on its five global platforms to generate revenue growth, while profit improvement is derived from mix and savings initiatives, such as holistic margin management initiatives, overhead reductions and capacity rationalization. GIS will also benefit as it utilizes its increased local and international scale, including the acquisitions of Annie’s and Yoki, and refocuses on accelerating growth through new product innovation and brand support. We expect the combination of the company’s profit improvement initiatives to drive mid-single digit EPS growth, which includes share repurchases absent acquisitions. GIS remains a Buy as shares trade at 11.7x estimated EBITDA and 16.7x earnings for the year ending May 2018. We calculate a PMV of $70 per share based on fiscal 2019 estimates.

Table 1

-2-

Ge ne ral Mills , Inc. Private Marke t Value Analys is 2017 - 2022P

(in m illions, except per share data)

Fiscal year end 5/31 2017 2018E 2019P 2020P 2021P 2022P North America Retail

Revenue 10,197$ 10,007$ 10,066$ 10,192$ 10,320$ 10,452$ Operating Profit 2,304 2,243 2,301 2,379 2,459 2,543

Convenience Stores & Foodservice Revenue 1,870 1,893 1,927 1,966 2,006 2,047 Operating Profit 401 404 413 425 436 448

Europe & Australia Revenue 1,825 1,916 1,964 2,003 2,043 2,084 Operating Profit 164 165 175 187 200 214

Asia & Latin America Revenue 1,728 1,768 1,813 1,877 1,943 2,012 Operating Profit 84 88 95 105 116 128

Corporate (119) (118) (128) (131) (133) (136)

Private Market Value Revenue 15,620$ 15,585$ 15,770$ 16,038$ 16,313$ 16,595$ Operating Profit 2,834 2,782 2,856 2,964 3,078 3,197 D&A 604 609 612 616 620 626 EBITDA 3,438 3,391 3,468 3,580 3,698 3,823 Valuation Multiple 14.0x 14.0x 14.0x 14.0x 14.0x 14.0x

Total Private Market Value 48,126$ 47,470$ 48,545$ 50,121$ 51,777$ 53,516$

Less: Net Debt (8,716)$ (8,496)$ (8,337)$ (8,205)$ (8,110)$ (8,051)$ Less: Minority & Redeemable Interests (1,269) (1,347) (1,347) (1,347) (1,347) (1,347) Less: Option Payment (a) (658) (663) (723) (803) (886) (973) Plus: Joint Ventures 1,110 1,256 1,295 1,358 1,423 1,479 Equity Private Market Value 38,594$ 38,221$ 39,433$ 41,124$ 42,858$ 44,625$

Shares Outstanding 577 570 563 557 550 544 PMV per share $67 $67 $70 $74 $78 $82 Current Market - Discount to PMV 22% 22% 26% 29% 33% 36%

(a) After-tax payments to buy out options holders at Private Market Value.

Source: Company data and Gabelli & Company estimates.

Table 2

I, Sarah Donnelly, the Research Analyst who prepared this report, hereby certify that the views expressed in this report accurately reflect the analyst’s personal views about the subject companies and their securities. The Research Analyst has not been, is not and will not be receiving direct or indirect compensation for expressing the specific recommendation or view in this report.

Sarah Donnelly (914) 921-5197 �Gabelli & Company 2017 Important Disclosures

ONE CORPORATE CENTER RYE, NY 10580 GABELLI & COMPANY TEL (914) 921-5130 FAX (914) 921-5098 Gabelli & Company is the marketing name for the registered broker dealer G.research, LLC, which was formerly known as G.research, Inc. Gabelli & Company ("we" or "us") attempts to provide timely, value-added insights into companies or industry dynamics for institutional investors. Our research reports generally contain a recommendation of "buy," "hold," "sell" or "non-rated.” We do not undertake to "upgrade" or "downgrade" ratings after publishing a report. We currently have reports on 565 companies, of which 50%, 33%, 3% and 15% have a recommendation of buy, hold, sell or non-rated, respectively. The percentage of companies so rated for which we provided investment banking services within the past 12 months is 0%, 0%, 0% and less than 1%. Ratings Analysts’ ratings are largely (but not always) determined by our “private market value,” or PMV methodology. Our basic goal is to understand in absolute terms what a rational, strategic buyer would pay for an asset in an open, arms-length transaction. At the same time, analysts also look for underlying catalysts that could encourage those private market values to surface. A Buy rated stock is one that in our view is trading at a meaningful discount to our estimated PMV. We could expect a more modest private market value to increase at an accelerated pace, the discount of the public stock price to PMV to narrow through the emergence of a catalyst, or some combination of the two to occur. A Hold is a stock that may be trading at or near our estimated private market value. We may not anticipate a large increase in the PMV, or see some other factors at work. A Sell is a stock that may be trading at or above our estimated PMV. There may be little upside to the value, or limited opportunity to realize the value. Economic or sector risk could also be increasing. We prepared this report as a matter of general information. We do not intend for this report to be a complete description of any security or company and it is not an offer or solicitation to buy or sell any security. All facts and statistics are from sources we believe to be reliable, but we do not guarantee their accuracy. We do not undertake to advise you of changes in our opinion or information. Unless otherwise noted, all stock prices reflect the closing price on the business day immediately prior to the date of this report. We do not use "price targets" predicting future stock performance. We do refer to "private market value" or PMV, which is the price that we believe an informed buyer would pay to acquire 100% of a company. There is no assurance that there are any willing buyers of a company at this price and we do not intend to suggest that any acquisition is likely. Additional information is available on request. As of August 31, 2017 our affiliates beneficially own on behalf of their investment advisory clients or otherwise approximately less than 1% of General Mills. Because the portfolio managers at our affiliates make individual investment decisions with respect to the client accounts they manage, these accounts may have transactions inconsistent with the recommendations in this report. These portfolio managers may know the substance of our research reports prior to their publication as a result of joint participation in research meetings or otherwise. No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. The analyst that wrote this report, or members of her household, owns no shares of GIS.

General Mills – Price Performance

Source: Public data. As of September 21, 2014 GIS had a BUY recommendation.