Kellogg Company announced that its board of directors has approved a plan to separate its North American cereal and plant-based foods businesses, via tax-free spin-offs, resulting in three independent public companies, each better positioned to unlock their standalone potential. The three companies, whose names will be determined later, would be:
- "Global Snacking Co." with about $11.4 billion in net sales, will be a leading company in global snacking, international cereal and noodles, and North America frozen breakfast, with iconic, world-class brands and strong underlying growth momentum and profitability.
- "North America Cereal Co." with about $2.4 billion in net sales, will be a leading cereal company in the U.S., Canada, and Caribbean, with a portfolio of iconic, world-class brands and compelling opportunities for investment and profit growth.
- "Plant Co." with about $340 million in net sales, will be a leading, profitable, pure-play plant-based foods company, anchored by the MorningStar Farms brand, with a significant opportunity to capitalize on strong long-term category prospects by investing further in North America penetration and future international expansion.
"Kellogg has been on a successful journey of transformation to enhance performance and increase long-term shareowner value. This has included re-shaping our portfolio, and today's announcement is the next step in that transformation," Steve Cahillane, Kellogg Company's chairman and chief executive officer, said in the announcement. "These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities. In turn, each business is expected to create more value for all stakeholders, and each is well positioned to build a new era of innovation and growth."
North America Cereal Co. and Plant Co. will both remain headquartered in Battle Creek, Michigan. Global Snacking Co. will maintain dual campuses in Battle Creek and Chicago, Illinois, with its corporate headquarters located in Chicago. Kellogg Company's three international regions' headquarters in Europe, Latin America, and AMEA will remain in their current locations.
Global Snacking Co.
The planned separations will result in a Global Snacking Co. that is expected to enhance its leadership position in the global snacking, international cereal and noodles, and North America frozen breakfast categories, by focusing investments and capital toward building upon its strong growth momentum and profitability.
Kellogg Company's three international regions – Europe, Latin America, and Asia Pacific, Middle East, and Africa ("AMEA") – will remain almost entirely intact within Global Snacking Co. Steve Cahillane will remain Chairman and Chief Executive Officer of Global Snacking Co.
Global Snacking Co. had estimated 2021 net sales of $11.4 billion and estimated EBITDA of approximately $2.0 billion on an adjusted basis, based on preliminary allocation assumptions.
Nearly 60% of its net sales come from global snacks, participating in growing categories and led by iconic brands including Pringles, Cheez-It, Pop-Tarts, Kellogg's Rice Krispies Treats, Nutri-Grain, and RXBAR, among others.
Less than a quarter of its net sales come from cereal in international markets, featuring brands such as Kellogg's, Frosties / Zucaritas, Special K, Tresor / Krave, Coco-Pops, and Crunchy Nut, among others. By remaining with Global Snacking Co., this international cereal business provides scale, continuity, and growth for the company's Europe, Latin America, and AMEA Regions.
About 10% of its net sales come from noodles in Africa, a rapidly expanding business. The remainder, less than 10% of its net sales, comes from frozen breakfast and the Eggo brand.
Geographically, North America will represent just under half of net sales, emerging markets about 30% of net sales, and developed international markets more than 20% of net sales.
North America Cereal Co.
The company plans to separate North America Cereal Co. as an independent business through a tax-free spin-off. North America Cereal Co. is a leader in cereal in the U.S., Canada, and Caribbean, with beloved brands, a heritage of innovation, and more than a century of operational success. As a standalone company, North America Cereal Co. will have greater strategic focus and operational flexibility, and will direct capital and resources toward unlocking growth, regaining category share, and restoring and expanding profit margins.
The proposed management team for North America Cereal Co. will be announced at a later date.
North America Cereal Co. had estimated 2021 net sales of $2.4 billion and estimated EBITDA of approximately $250 million on an adjusted-basis, based on preliminary allocation assumptions.
The business is focused on ready-to-eat cereal in the U.S., Canada, and Caribbean.
North America Cereal Co.'s portfolio is comprised of iconic brands such as Kellogg's, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi and Bear Naked.
The company intends to separate Plant Co. as an independent business through a tax-free spin-off, while also exploring other strategic alternatives, including a possible sale.
Anchored by the leading MorningStar Farms brand, Plant Co. will be a profitable, pure-play, plant-based foods company. This business offers a full portfolio of plant-based offerings across multiple product segments and eating occasions. Kellogg has grown MorningStar Farms steadily since its acquisition over 20 years ago, and the brand now has the highest share and household penetration in the frozen vegetarian/vegan category.
The proposed management team for Plant Co. will be announced at a later date.
Plant Co. had estimated 2021 net sales of $340 million and estimated EBITDA of approximately $50 million on an adjusted-basis, based on preliminary allocation assumptions.
The business is currently focused on the U.S., Canada, and Caribbean.
As an independent business, Plant Co. will have the opportunity to build on its strong base of growth and profitability, focusing its resources and investments towards capitalizing on strong category prospects, by building awareness and penetration in North America, and expanding internationally in the future.
The company expects the North America Cereal Co. spin-off may precede that of Plant Co., with both currently targeted to be completed by the end of 2023. The transactions will follow the satisfaction of customary conditions, including reviews and final approval by Kellogg's board of directors, receipt of an Internal Revenue Service ruling and relevant tax opinions with respect to the tax-free nature of the transactions, effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financials of the independent companies.
A dedicated website providing ongoing information about the transaction is available at unleashingourpotential.com.
*All net sales and adjusted-basis EBITDA figures are based on the Company's 2021 unaudited results derived from internal management reporting, further adjusted for splits by brands and markets, as well as preliminary cost and expense allocations, including corporate expenses; these figures will be refined prior to the transactions. Please refer to the reconciliations of adjusted-basis EBITDA, a non-GAAP financial measure, to reported operating profit in this press release.