K - Kellogg stock gains 5%: management announces business split
Kellogg food Company ( NYSE:K ) plans to build separate plant-based, snack, and cereal companies. The manufacturer of Corn Flakes, Froot Loops and Special K cereals plan to split the company into three separate publicly-traded business entities.
The company announced that it is separating its smaller plant-based brands and its North America-based cereal business into two different corporations, leaving a faster-growing company that’ll concentrate on selling snacks globally.
Management statements
Kellog Chief Executive Officer, Steve Cahillane, said:
These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities. In turn, each business is expected to create more value for all stakeholders, and each is well-positioned to build a new era of innovation and growth.
Kellogg’s, which also owns plant-based food manufacturer, MorningStar Farms, claimed that the new, yet-to-be-named companies should be operational by the end of 2023.
The company’s snacks and cereals businesses bring in annual sales of roughly $11.4 billion and $2.4 billion respectively. The plant-based business generates about $340 million in sales. The company says it will be moving its corporate headquarters to Chicago from Battle Creek Michigan. However, the snack company will maintain dual HQs in both cities.
Splitting of businesses
Kellogg’s three international corporate headquarters in the Middle East, Asia, Latin America, and Europe will stay in their current locations.
Companies worldwide have started splitting up at a very high rate, including the likes of Johnson& Johnson, IBM and General Electric. However, it’s rare to see food manufacturers and producers make such splits.
Adam Crisafulli, an equities analyst for Vital Knowledge, said:
The splits seems similar to the Kraft-Mondelez separation whereby the higher-growth assets (in this case ‘global snacking’) are removed from the slower growing ones (“North America cereal”).
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