Effect on margins
So far this year, the Kellogg Company (K) has had some acquisitions that it expected would benefit its operating profit and net earnings in fiscal 2015. These acquisitions include Mass Food Group and BiscoMisr, and the Kellogg Company is planning an acquisition of Diamond Foods. We’ll review the details of these acquisitions in this article. The Kellogg Company’s peers in the industry include Mead Johnson Nutrition Company (MJN), McCormick & Company (MKC), and Keurig Green Mountain (GMCR). They reported operating margins of 23.1%, 12%, and 16.6%, respectively, in their last quarter. The First Trust NASDAQ-100 Ex-Technology Sector Index SM Fund (QQXT) invests 1.4% of its portfolio in the GMCR stock.
Kellogg Company in talks to acquire Diamond Foods
The Kellogg Company is in advanced talks with snack maker Diamond Foods (DMND), which placed itself up for auction earlier this year. The price of the deal is expected to reach over $1.5 billion, and the Kellogg Company could offer Diamond Foods between $35 and $40 per share. The deal with Diamond Foods is expected to help Kellogg transition away from cereal and further into snack foods, since the breakfast cereal market has been struggling lately.
Acquisition of Mass Food Group
On September 28, the company announced that it has acquired Egypt’s leading cereal company, Mass Food Group. This acquisition is in line with the company’s emerging market growth strategy. The company expects that the combination of Mass Food Group’s manufacturing capabilities, established local brands, and sales and distribution infrastructure, coupled with Kellogg’s product innovation, international sales knowledge, iconic brands, and marketing expertise, will help unlock the growth potential of the cereal category in the key markets of Egypt and North Africa.
The company has agreed to pay ~$50 million for Mass Food Group and is financing the transaction with international cash on hand. However, due to the size of Mass Food Group’s annual sales, the transaction is not expected to have a material impact on Kellogg’s annual operating profit and net earnings in 2015.
Other acquisitions in fiscal 2015
Earlier this year, the Kellogg Company acquired BiscoMisr, Egypt’s leading packaged biscuit company. In mid-September, Kellogg also announced a joint venture with Tolaram Africa to develop snacks and breakfast foods for the West African market. Also, Kellogg acquired 50% of Multipro, a premier sales and distribution company in Nigeria and Ghana.