"Share buy-backs are on the agenda, though they have not yet been approved by the board," said Gerald Corbett, Grand Met's finance director.
Mr Corbett said no decision on the timing of the buy-back had yet been taken, though Grand Met plans to seek shareholder approval for the scheme at its next annual meeting in March.
Analysts said falling debt levels could mean up to pounds 1bn would be available for distribution to shareholders in 1998 once complicated tax considerations had been ironed out. In the year September 1996 net borrowings fell by pounds 633m to pounds 2.7bn, representing almost three-quarters of shareholders' funds.
It is highly unusual for a company with such high gearing levels to consider a share buy-back. But Mr Corbett insisted Grand Met's financial position was strong, with operating profits covering the pounds 190m annual interest bill a comfortable six times.
News of the plans came as Grand Met drew a line under its acquisitive past. Dismissing speculation that it was poised to swoop for Guinness or even Dutch group BolsWessanen, recently appointed chief executive John McGrath said: "We are not looking for big acquisitions, whether it is a drinks business or a food business."
Mr McGrath was speaking after Grand Met posted a 6 per cent rise in full- year pre-exceptional profits to pounds 965m, in line with market estimates.
But the shares closed 10.5p lower at 446p as analysts scaled back their 1997 forecasts by pounds 50m to around pounds 1bn to take account of sterling's recent strength against the dollar. Some 70 per cent of Grand Met's profits are denominated in the US currency.
The figures included good performances from Pillsbury, the US baked goods business, and the IDV spirits division, but Burger King was hit by the BSE scare in Britain and Germany, costing Grand Met around pounds 10m in lost profits.
Overall, profits from the Burger King operations, excluding refranchising profits, were flat at pounds 165m.
At the pre-tax level, profits fell by 58 per cent to pounds 388m following a pounds 550m exceptional charge taken on the sale of Pearle, the US eye-care specialist, and some of its European food businesses.
Yesterday Grand Met also announced the sale of its Hoffman Menu food group to a German management team for pounds 50m.
Investment column, page 26