[1] Because of the uncertainty surrounding the final amounts of these transactions, they are difficult to evaluate for the purpose of tax liability.
In March 2000, Diageo's chief operating officer contacted General Mills’ chairman and CEO to explore a possible sale of Pillsbury.
In an effort to bridge the difference in positions, the two firms agreed upon including in the terms of the deal a contingent payment on the first anniversary of the transaction that would depend on General Mills’ share price.
James Lawrence, chief financial officer of General Mills, said, “We genuinely believe this is a way in which they could have their cake and we could eat it, too.
There’s no question in my mind that, absent this instrument, we wouldn’t have been able to reach this deal.” David Van Benschoten, General Mills’ treasurer, added that the contingent payment was another example of the “development of the use of [options] in the past 20 years as finance has come to first understand, and work with, the constructs of optionality.”