Diageo has sold part of its stake in General Mills Inc. The drinks giant sold around 33.4m common shares of General Mills stock in an underwritten public offering. General Mills also bought back around 16.5m shares of its common stock from Diageo.

Diageo raised US$2.26 bln from its sale, to be used initially to reduce debt.

Diageo did hold about 79m common shares of General Mills stock, which it received when General Mills bought Pillsbury from the drinks company in 2001, and still owns 25m shares.

General Mills said it would finance the buyback by selling US$835m worth of preferred interests in its cereal business to an affiliate of Lehman Brothers. Related to that, it said Lehman Brothers plans to issue $750m worth of three-year notes that will be mandatorily convertible into General Mills common stock in October 2007.