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General Mills mum on report that it is eyeing Yoplait

NEW YORK/PARIS (Reuters) - U.S. foods group General Mills <GIS.N> declined to comment on Sunday on a British newspaper report that it was mulling a bid for French yogurt maker Yoplait following a contract dispute.

The Sunday Times said in an unsourced report that the maker of Cheerios cereal could pay 1 billion pounds ($1.56 billion) for unlisted Yoplait, whose products it distributes in the United States.

"As a standing practice, we don't respond to rumors or comment on speculation," General Mills spokeswoman Kirstie Foster said.

General Mills said last week it was seeking arbitration over a dispute with the French entity from which it licenses the Yoplait name. It said it was objecting to a French bid to terminate their 30-year-old distribution deal.

Yoplait is co-owned by Sodiaal, France's largest milk cooperative, and private equity fund PAI Partners.

The French fund said in July that it would be open to potential offers for its stake.

A U.S. bid in the French dairy sector could rekindle memories of an unexpected dispute over the industry five years ago.

Speculation of a bid from PepsiCo <PEP.N> for Yoplait's French rival Danone <DANO.PA> drove up the latter's share price in mid-2005 and triggered talk of a foreign takeover.

The then-conservative government -- led by Dominique de Villepin, a party rival to the current conservative President Nicolas Sarkozy -- responded by declaring the dairy industry strategic and introducing a policy of "economic patriotism."

The interest from PepsiCo was never publicly confirmed, but the dispute was credited with speeding up the introduction of rules to regulate hostile foreign bids in strategic industries.

A presidential decree named 11 protected industries such as defense, leaving a lasting mark on French merger policy even though dairy did not make it to the ring-fenced list.

(Reporting by Ransdell Pierson and Tim Hepher; Editing by Maureen Bavdek)