Kellogg It announced Tuesday that it plans to split into three independent public companies, splitting its popular brands into premium snack, cereal and vegan companies.
The company’s shares were up 8% in premarket trading on the news.
Kellogg’s North American grain business and the plant-based division together accounted for about 20% of its revenue last year. The remaining business includes international snacks, pasta and cereals, and North American frozen breakfast brands, which collectively represented about 80% of their 2021 sales.
“All of these companies have great potential in their own right, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” CEO Steve Cahillan said in a statement.
The company said it will also explore other strategic alternatives, including the potential sale of its plant-based business, beyond its planned sub-offering.
Kellogg said it expects to complete the tax-exempt subsidiaries by the end of 2023. The names of the new companies have not yet been determined, and the proposed management teams for the two spin-offs will be announced at a later time. Cahillan will remain CEO of the company focused on global snacks.
The headquarters of the three companies will remain unchanged. Both the North American Grain Company and the plant-based food subsidiary will be based in Battle Creek, Michigan. The global snack company will keep its headquarters in Chicago, with another campus in Battle Creek.
Cheez-It, Pop-Tarts and RXBAR are among the brands to be listed under the global snack food company, which generated $11.4 billion in sales last year. About 10% of these sales come from the growing pasta business in Africa, while another 10% come from Eggo pies and the rest of the frozen breakfast business. North America will account for nearly half of the company’s revenue.
The plant-based Kellogg division reported $340 million in sales and nearly $50 million in EBITDA last year. The planned subsidiary will use its Morningstar Farms brand as its anchor. The sub-presentation offers investors another plant-based stock play Beyond Meatwhich has not posted a quarterly dividend in nearly three years and has seen its shares drop 63% this year.
The proposed North American cereal company would include Fruit Lubes, Special K and Rice Krispies. Last year, the company saw sales of $2.4 billion. In the near term, the sub-offer will focus on recovering from supply chain disruptions and regaining lost market share. Kellogg expects that it will generate consistent revenue over time as a stand-alone company while improving profit margins.
Read the full press release here.
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