BATTLE CREEK — Kellogg Co. has unveiled plans to split into three independent companies and base the corporate headquarters for the largest of the three in Chicago.
The temporarily named Global Snacking Co. — a business focused on snacks, global cereal and frozen breakfast foods that accounted for 80 percent of Kellogg’s 2021 sales — would be headquartered in Chicago but maintain corporate offices in Battle Creek, where the company was founded 116 years ago.
Meanwhile, two separate and smaller companies — with temporary names North American Cereal Co. and Plant Co. — will focus on cereals and plant-based foods and remain headquartered in Battle Creek.
The spinoffs come after a series of strategic investments, divestitures and acquisitions globally in the last few years that restored sales growth.
The move represents the “next step” in Kellogg’s transformation that will drive higher growth and earnings, according to Chairman and CEO Steven Cahillane.
The company’s transformation so far has resulted in “a more growth-oriented portfolio that has produced strong growth,” Cahillane said during a morning conference call today with brokerage analysts.
At the start of 2022, Kellogg had about 31,000 employees companywide and had just resolved a protracted collective bargaining dispute with its unionized employees that involved strikes at plants in Battle Creek, Tennessee, Nebraska and Pennsylvania. The company at the start of the year carried a “substantial” $7 billion in debt with total equity of $3.7 billion, according to the company’s 2021 annual report.
As three independent companies, each can “focus on their distinct strategic priorities and financial targets that best fit their own markets and opportunities,” Cahillane said.
“The reshaped portfolio is working, but we believe it could work even better, particularly if our U.S. and Canada cereal and plant-based businesses were independent,” he said. “Our shareholders will own a trio of strong, independent companies with strong iconic brands, attractive economics and improved outlooks. … We think the future is very bright for all three of these companies.”
Kellogg shares during premarket trading jumped nearly 7 percent upon today’s announcement.
Cahillane noted that spinning out three companies will create “exciting career opportunities” for employees at each.
Kellogg (NYSE: K) expects to complete the spinoffs of North America Cereal Co. and Plant Co. by the end of 2023.
Until then: “We’re going to run the business as we normally run it as we prepare for the split down the road,” Cahillane said. It remains unclear how the company’s Battle Creek workforce presence will shift.
Global Snacking Co., with 2021 sales of $11.4 billion and $2 billion in earnings before interest, taxes, depreciation and amortization (EBITDA), will include Eggo waffles, Pringles potato chips and Cheez-It crackers among its brands.
The $2.4 billion North American Cereal Co., with $250 million in 2021 EBITDA, will produce breakfast cereals for the North American and Caribbean markets and include iconic brands such as Corn Flakes, Frosted Flakes, Fruit Loops and Apple Jacks.
Plant Co., with $340 million in 2021 sales and $50 million in EBITDA, will include the Morning Star Farms brand of vegan foods in the U.S., Canada and Caribbean.
Cahillane said Kellogg could opt to sell the plant-based foods business before completing the spinoff.
“We are committed to a spin, but we will also evaluate other strategic alternatives should they present themselves, and that could happen at any time,” he said. “We believe that the business is a terrific business with great value.”
Managing Editor Andy Balaskovitz contributed reporting to this story.
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