Kellogg Company (K) reached an agreement to sell its selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses to Italian confectionery giant Ferrero for $1.3 billion (or 1.6 billion euros at current exchange rates). The transaction is expected to close by the end of July. Kellogg stock, which hit a 52-week low ($53.14) on March 13, opened flat today.
Kellogg had announced in November 2018 that it is exploring the potential sale of brands and assets related to its cookies, fruit-flavored snacks, pie crusts and ice cream cones businesses.
This sale represents a portion of Kellogg’s North America snacking business. The company will be selling some of its cookies business, including brands like Keebler, Mother’s, Famous Amos, Murray’s, and Murray’s Sugar Free. The transaction includes production facilities in Augusta, Georgia; Florence, Kentucky; Louisville, Kentucky; Allyn, Washington; and Chicago, Illinois.
In 2018, these businesses recorded sales of about $900 million and operating profit of approximately $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% dilutive to Kellogg’s projected 2019 currency-neutral adjusted earnings per share.
“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,” said CEO Steve Cahillane.
The Battle Creek, Michigan-based firm will retain the rest of its North America snacking businesses, including its crackers, salty snacks, wholesome snacks, and toaster pastries brands.
In early February, Kellogg reported its Q4 results in which the company beat Street’s earnings views, while revenue met the estimates.
Shares of Kellogg were have inched up slightly in the last three months and dropped 12% in the past one year period.
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