Kellogg to Split Into Three Public Entities — What Investors Can Expect
Kellogg’s Board of Directors has approved a plan for it to split into three independent public entities. Get the details on what will happen to its stock.
For decades, Kellogg has remained one of the leading suppliers of cereals, snacks, and breakfast products. The company intends to continue putting forth the effort to hold its position. The 116-year-old company announced on June 21, 2022, that it plans to spin off its U.S., Canadian, and Caribbean cereal and plant-based businesses, which would allow it to separate into three independent companies.
So, what will happen to Kellogg’s stock?
Kellogg’s Board of Directors has approved a plan for it to split into three independent public entities.
To help “further enhance performance and value,” Kellogg has decided to separate itself into three companies, according to the company’s latest press release. Although the multinational food manufacturing company hasn’t assigned a name to each of the three new businesses yet, it did share details on what the “tax-free spin-offs” will look like.
Here’s how Kellogg plans to separate itself:
Global Snacking Co.
This unit, which took in an estimated $11.4 billion in net sales for 2021, will include brands like Pop-Tarts, Cheez-It, and Pringles. The entity will focus on “enhancing” Kellogg’s ability to lead in the global snacking, international cereal and noodle, and North America frozen breakfast categories.”
According to Kellogg, nearly 60 percent of its net sales derive from global snacks. Global Snacking Co. shall remain closely intact with the following regions: Europe, Latin America, Asia Pacific, Middle East, and Africa. The company says Steve Cahillane will continue to serve as the Chairman and CEO of this entity.
North America Cereal Co.
North America Cereal Co. will officially become its own entity through a tax-free spin-off. As a result, the company expects to “have greater strategic focus and operational flexibility.” In 2021, North America Cereal Co. took in an estimated $2.4 billion in net sales.
Although Kellogg has yet to assign a management team to head this entity, it will oversee brands like Frosted Flakes, Fruit Loops, Raisin Bran, and other well-known cereals Kellogg has built its reputation around.
Plant Co. will also become an independent entity through a tax-free spin-off. In 2021, Plant Co. raked in a reported $340 million in net sales. Kellogg says it will serve as a ‘“pure-plus, plant-based foods company and will focus on the U.S., Canada, and the Caribbean.
Kellogg says the company will be “anchored” by MorningStar Farms and will announce the management team for the entity at a later date.
Kellogg says North America Cereal Co. along with Plant Co. will remain headquartered in Battle Creek, Mich. The cereal and snack company says Plant Co. will maintain two campuses located in Battle Creek and Chicago.
Steve Cahillane says Kellogg is still deciding how it will divide up its dividend among the three entities.
Following the announcement of the spin-offs, Kellogg’s stock jumped dramatically. On June 17, the company’s stock was trading at around $67 per share. By June 21, Kellogg’s stock had reached as high as $71 per share before noon.
Kellogg says its spin-offs should be completed by the end of 2023 and will result in “tax-free distributions of North America Cereal Co. and Plant Co. shares to Kellogg Company shareowners.” The company says shareholders will receive “shares in the two spin-off entities on a pro-rata basis relative to their Kellogg holdings at the record date for each spin-off.”
CNBC also spoke with Cahillane who shared that the cereal and snack giant has yet to determine “how it will divide up its dividend among the three companies.”