Kellogg Company has recently announced that it has made an agreement to sell selected cookies, pie crusts, fruit and fruit-flavored snacks, and ice cream cones businesses to the Ferrero Group and its related companies. With the cash transaction valued at $1.3 billion, the divestiture is a mixed bag for Kellogg's, but that’s the way the cookie crumbles.
"This divestiture is yet another action we have taken to reshape and focus our portfolio, which will lead to reduced complexity, more targeted investment, and better growth," said Steve Cahillane, Kellogg's Chairman and Chief Executive Officer. "Divesting these great brands wasn't an easy decision, but we are pleased that they are transitioning to an outstanding company with a portfolio in which they will receive the focus and resources to grow."
A large portion of the divestiture includes the company’s cookies business, including brands like Keebler®, Mother's®, Famous Amos®, Murray's®, and Murray's Sugar Free®, as well as cookies manufactured for Girl Scouts of the U.S.A. The transaction includes facilities in Augusta, Georgia; Florence, Kentucky; Louisville, Kentucky; Allyn, Washington; and Chicago, Illinois. Not everything is going to the Ferrero Group, as Kellogg's will be retaining the rest of its North America snacking businesses including its wholesome snacks, crackers, salty snacks, and toaster pastries brands.
The businesses being sold recorded net sales of nearly $900 million in 2018, and an operating profit of about $75 million, including estimated indirect corporate expenses, according to the press release. The transaction is expected to be less than five percent dilutive to Kellogg’s projected 2019 currency-neutral adjusted earnings per share, assuming the cash proceeds are used only to reduce outstanding debt.
"On behalf of our entire company, I want to thank the many employees who support these businesses and have contributed to the strength of these brands," Cahillane added. "We appreciate their passion, commitment, and everything they have done for Kellogg. These talented individuals are going to a first-class organization in Ferrero, where they undoubtedly will thrive."
The transaction is expected to close by the end of July, subject to customary closing conditions, including applicable regulatory approvals.
What will become of Kellogg's without its cookies? And will this sale lead to a stronger portfolio? Keep reading Deli Market News for updates.