Kellogg’s share price jumps after company announces split and headquarters move to Chicago
Kellogg’s, which also owns MorningStar Farms, the plant-based foods maker, said on Tuesday that the spin-off of the yet-to-be-named grain and plant-based foods companies should be complete by the end of next year.
Kellogg’s had net sales of $14.2 billion in 2021, including $11.4 billion generated by its snacks division, which makes Cheez-Its, Pringles and Pop-Tarts, among other brands. Cereals accounted for $2.4 billion in additional sales last year, while plant-based sales totaled around $340 million.
“These companies all have significant stand-alone potential, and increased focus will allow them to better direct their resources to their distinct strategic priorities,” said CEO Steve Cahillane.
Cahillane will become chairman and CEO of the global snacking company. The management team of the grain company will be named later. The board of directors approved the splits.
Shareholders will receive shares in both spin-offs in proportion to their holdings in Kellogg.
Cereal sales in the United States have been declining for years as consumers turn to more portable products, such as energy bars. They saw a brief spike during pandemic shutdowns, when more people sat down for breakfast at home. But sales fell again last year.
Kellogg’s grain business was also rocked last fall by a 10-week strike by more than 1,000 workers at factories in Michigan, Nebraska, Pennsylvania and Tennessee. The strike ended after the company promised higher wages, improved benefits and a faster path to permanent employment for its temporary workers.
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In March, a few hundred other workers at a factory that makes Cheez-Its won a new contract with 15% wage increases over three years.
Kellogg said he would explore other options for his herbal business, including a possible sale. Sales of plant-based meat in the United States have plateaued in recent months after several years of strong growth.
The company’s headquarters will move from Battle Creek, Michigan to Chicago, but it will maintain dual headquarters in both cities for its snacks business, which accounts for about 80% of current sales. Kellogg’s three international headquarters in Europe, Latin America and AMEA will remain at their current locations.
Kellogg has been focusing on snacks for years. In 2019, the company sold its cookie, pie crust, ice cream cone and fruit businesses to the Ferraro Group.
Major companies have begun to split at an accelerated pace, including General Electric, IBM and Johnson & Johnson, but such splits are rarer for food producers. The industry’s last major split was in 2012, when Kraft spun off to create Mondelez.
Mondelez made its own big play in the snacks business on Monday when it announced it would acquire Clif Bar & Co., a major energy bar company. The $2.9 billion deal is expected to close in the third quarter.
This is a particularly perilous time in the food industry due to rising costs, both for labor and materials. Russia’s invasion of Ukraine pushed grain prices higher and this month the United States reported inflation hitting four-decade highs.
Shares of Kellogg Co. jumped 8% to $73.29 before the opening bell on Tuesday.
Boeing and Caterpillar recently announced that they were moving their headquarters out of the Chicago area.
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