UK – Drinks firm Diageo has transferred four million shares in US cereal maker General Mills to its UK pension plan to help cut the scheme’s 750 million-pound (1.1 billion-euro) deficit.

“Diageo has transferred four million General Mills shares to the Diageo UK pension plan, reducing the deficit on post-employment plans by 100 million pounds,” the company said in a statement.

“At a valuation of 45.20 dollars per share and at a $1.78/£1 exchange rate this will reduce the total deficit, after taxation, for Diageo’s post employment plans, which at June 30 2004 totalled 750 million pounds, by 100 million pounds.”

The move was part of a larger transaction which saw Diageo make a 205 million-pound profit on the disposal of most of its 20% stake in General Mills. It sold 49.9 million shares in General Mills for 2.26 billion dollars and said the proceeds would initially be used to reduce net debt.

“We had targeted a disposal of these shares in calendar 2004 and we are delighted to be able to make this announcement today,” said chief executive Paul Walsh. “By way of this transaction we have monetised the majority of our holding in General Mills with now only 25 million shares still in our ownership.”

“Today’s transaction represents one of the last steps on our strategic journey to build the world’s leading premium drinks business.”

Diageo added that UBS Investment Bank acted as financial advisor with Slaughter & May as English legal counsel.

Michael Glasgow, director of pensions at Diageo said the move was not a surprise to the scheme’s trustees.

“The trustees have been aware for some time,” he said in an interview, although they were not informed of the exact timing of the share transfer. He added that the decision fits in with the scheme’s traditionally high equity allocation of up to 90% and that it does not break any scheme rules.

Glasgow also said the scheme received specific independent advice on the transfer, though he declined to name the advisor.

He stated the funding of the scheme will be reviewed on a regular basis though it was “probably unlikely” that there would be any further injections of General Mills stock.

In July Diageo said the FRS17 pension accounting standard led to an 88 million-pound lower operating profit.