Kellogg shares increase methods to separate into three companies

June 22, 2022: -On Tuesday, Kellogg announced that it intends to separate into three independent public companies, which sanctions off its iconic brands into distinct snacking and plant-based businesses.

Shares of the company increased 6.5% in premarket trading on the announcement.

“These businesses all hold powerful standalone potential, and an enhanced focus will enable them to direct their resources in their distinct strategic priorities,” CEO Steve Cahillane said.

The company said it is exploring further strategic alternatives for its plant-based business, including a potential sale.

Combined, Kellogg’s plant-based division and North American cereal business accounted for about 20% of the company’s revenue last year. The remaining business has snacks, noodles, international cereal, and North American frozen breakfast brands.

The tax-free spinoffs are expected to be completed by the end of 2023.

Names for the new companies haven’t yet been decided, and proposed management teams for the two spinoffs will be announced by the first quarter of next year. Cahillane stayed on as chief executive of the global snacking company.

That business will house brands like Pringles, Cheez-It, Pop-Tarts, and RXBAR and last year reported $11.4 billion in revenue. Almost 10% of those sales come from its increasing noodle business in Africa, while another 10% comes from Eggo waffles and its frozen breakfast business. North America means nearly half of the company’s revenue.

According to Cahillane, the snack-focused company will also be looking to add to its portfolio through acquisitions.

The proposed North American cereal company includes Froot Loops, Special K, and Rice Krispies. In the previous year, that business saw sales of $2.4 billion. In the near term, the spinoff focuses on returning from supply chain disruptions and regaining missing market share. Kellogg expects it to generate stable revenue as a standalone company while improving profit margins over time.

“It’s a pretty stable business, somewhat declining,” Cahillane told CNBC Sara Eisen. Following the announcement, adding he expects more innovation and brand building from the spinoff since its brands won’t have to compete with Pringles or Cheez-It for resources.

 

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Kellogg shares increase methods to separate into three companies