US-based food giant Kellogg on Tuesday said its board has approved a plan to split the company into three entities.
The new companies, whose names will be determined later, will be focused on snacking, cereals, and plant separately, according to a company statement.
“We expect the North America Cereal spin-off may precede that of Plant, with both currently targeted to be completed by the end of 2023,” the company said in the statement.
It added that the proposed spin-offs are intended to result in tax-free distributions of North America Cereal Co and Plant Co shares to Kellogg Company shareowners.
Shareowners would 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.
The snacking business, 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, Kellogg said.
“This business is expected to be a higher-growth company than today’s Kellogg Company, featuring a more growth-oriented portfolio and aided by more focused resources and attention to brand building, innovation, and international expansion of world-class brands, and to building scale in emerging markets,” the statement said.
It added that the snacks business is expected to expand profit margins through operating leverage, revenue growth management, productivity, and increasing emerging-markets scale.
The cereal business, with about $2.4 billion in net sales, will be a leading cereal company in the US, Canada, and Caribbean, with a portfolio of iconic, world-class brands and compelling opportunities for investment and profit growth
“Near term, North America Cereal Co. will be focused on the restoration of inventory, profit margins, and share position following 2021 supply disruptions. Longer term, it will focus resources and strengthen the business through enhancing its portfolio, operating capabilities, and productivity,” it added.
The company said this business is expected to generate stable net sales over time, with improving profit margins that will drive profit growth, higher cash flow, and increased return on invested capital.
The plant business, 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.
“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 business is expected to accelerate net sales growth over time, from previously disclosed portfolio-segment assumptions,” the company said.