Food Service & Agriculture, Manufacturing, and Retail

Kellogg selling several businesses for $1.3B

April 1, 2019
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Kellogg Company is based in downtown Battle Creek. Photo via flickr.com

Kellogg Company is divesting a group of its businesses to a foreign company.

Battle Creek-based Kellogg Company has reached a definitive agreement to sell certain cookies, fruit and fruit-flavored snacks, pie crusts and ice cream cones businesses to Alba, Italy-based The Ferrero Group, a global confectionary producer, and its related companies.

The cash transaction is valued at $1.3 billion and includes brands and assets primarily related to the businesses being sold.

The transaction is expected to close by the end of July, subject to customary closing conditions and regulatory approvals.

“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, chair and CEO, Kellogg Company. 

“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.”

Transaction details

The divestiture represents a portion of Kellogg’s North America snacking business, including cookie brands Keebler, Mother’s, Famous Amos, Murray’s and Murray’s Sugar Free, as well as cookies manufactured for Girl Scouts of the USA. 

It also includes its fruit and fruit-flavored snacks, pie crusts and ice cream cones businesses. 

The transaction includes several production facilities: Augusta, Georgia; Florence, Kentucky; Louisville, Kentucky; Allyn, Washington; and Chicago.

In 2018, the businesses recorded net sales of nearly $900 million and an operating profit of about $75 million, including estimated indirect corporate expenses.

Assuming the cash proceeds are used only to reduce outstanding debt, the transaction is expected to be less than 5 percent dilutive to Kellogg’s projected 2019 currency-neutral adjusted earnings per share.

Kellogg will retain the rest of its North America snacking businesses, including its crackers, salty snacks, wholesome snacks and toaster pastries brands.

“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 said. “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.”

M&A advisors

Three New York-based firms assisted Kellogg with the transaction.

Evercore was the lead advisor to Kellogg, while Goldman Sachs acted as co-advisor.

Wachtell, Lipton, Rosen & Katz provided legal counsel.

Kellogg

Founded in 1906, Kellogg Company (NYSE: K) offers hundreds of foods, including cereal, snacks and frozen foods.

Its brands currently include Pringles, Cheez-It, Keebler, Special K, Frosted Flakes, Pop-Tarts, Corn Flakes, Rice Krispies, Eggo, Mini-Wheats, Kashi, RXBAR, MorningStar Farms and more.

Kellogg had 2018 sales of about $13.5 billion.

Ferrero Group

Founded as a family business in 1946 in Alba, Italy, global confectionary group Ferrero entered the U.S. in 1969 with Tic Tac breath mints and is now also known for other products, including Ferrero Rocher hazelnut chocolates, Nutella, Kinder Joy and Fannie May chocolates.

The company has a presence in 170 countries and a workforce of more than 30,000 people across 55 countries.

It had 2018 global sales of over $12 billion.

Its subsidiary, Chicago-based Ferrara Candy Company produces 35 brands, including SweeTarts, Trolli, Brach’s, Black Forest, Butterfinger, Crunch, Laffy Taffy, Nerds, Lemonhead, Red Hots and Now and Later.

Ferrara Candy Company has 4,000 employees and an operational network of manufacturing, distribution and R&D facilities across North America.

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