Diageo has moved to sell a large part of its stake in General Mills, with two of the drinks giant's officials subsequently stepping down from the board of the Minneapolis-based food maker.

The drinks company announced today that General Mills has filed a universal shelf registration statement with the US Securities and Exchange Commission (SEC) registering equity and debt securities in General Mills. Diageo is required to register the common shares of General Mills it owns before it can dispose of those shares in a public offering. Under a separate agreement between Diageo and General Mills, this registration statement includes 49,907,680 common shares of General Mills owned by Diageo.

The sale of shares under the registration statement is dependent on a number of factors, Diageo said, including the timing of the SEC's declaration of the effectiveness of the registration statement and prevailing market conditions. Therefore, the company said, there is no certainty as to the size or timing of a sale of any or all of the General Mills common shares owned by Diageo.

In connection with the filing of the registration statement, Paul Walsh, CEO of Diageo, and Jack Keenan, a former director of Diageo and designee of Diageo on the General Mills board, have resigned from the General Mills board. These resignations facilitate an eventual sale of the common shares. As a consequence of the resignations, Diageo will no longer account for General Mills as an associate. The pro forma impact of this change in accounting on the reported results for the year ended 30 June 2003 is a 3.0 pence per share reduction in eps.

Diageo currently holds 79 m common shares of General Mills, which at the close of the New York Stock Exchange on Tuesday were trading at $45.86 per common share.  Proceeds from any sale will depend on market conditions at the time of sale.