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Kellogg’s approves separation into two companies as cereals and snacks split

September 15, 2023
Consumer Packaged Goods

The board of directors of Kellogg’s has given the green light to its planned division into two separate public companies: Kellanova, which will focus on snacks and emerging markets and WK Kellogg, which will retain the cereals businesses. The separation is expected to be completed on October 2, creating two “stronger, more focused companies.”

Kellanova will be the larger business, with projected net sales of US$13.4 to US$13.6 billion and WG Kellogg will have projected net sales of approximately US$2.7 billion.

Kellanova will comprise snacks, international cereals, noodles and frozen foods, while WK Kellogg will build on its portfolio of “iconic cereal brands” – such as Frosted Flakes, Special K and Froot Loops.

Kellogg shareowners will receive one share of WK Kellogg Co for every four shares of Kellogg Company they own. Kellanova will continue to trade on the New York Stock Exchange (NYSE) under the ticker symbol “K”, while WK Kellogg will trade under the ticker symbol “KLG” – named after its founder Will Keith Kellogg.

“After more than a year of comprehensive planning and execution, we are more confident than ever that the separation will produce two stronger companies and create substantial value for shareowners,” says Steve Cahillane, chairman and CEO at Kellogg’s.

International snacks giant
Kellanova, the new company that will emerge from the split of Kellogg Company, will strongly focus on snacks and emerging markets, with brands that have ample room for growth.

According to Kellogg’s, Kellanova aims to achieve annual growth rates of 3-5% for net sales, 5-7% for operating profit and 7-9% for earnings per share starting in 2024.

“We are looking forward to a new era as Kellanova, marked by a more growth-oriented portfolio, a renewed vision and strategy and an energized organization grounded by a winning culture and our founder’s values,” notes Cahillane, who will remain chairman and CEO of Kellanova.

“These elements build on what has already been a track record of strong and consistent financial performance for the Kellanova portfolio.”

In 2022, international snacks and emerging markets collectively represented about 80% of Kellanova’s net sales. International cereal is another key segment for Kellanova, representing about 20% of its net sales last year.

Classic cereals
WK Kellogg will aim to boost its competitiveness, profitability and cash flow by focusing on its traditional cereal brand and leading market share in North American cereal, as well as by aligning its commercial strategy and execution and modernizing its supply chain.

WK Kellogg plans to improve its margins through supply chain innovation and stable top-line growth.

“WK Kellogg Co has a 117-year legacy of innovation and the soul of a start-up, with an organization incredibly energized by our future, ”remarks Gary Pilnick, who will serve as WK Kellogg, Chairman and CEO following the separation.

“As a standalone company, we will benefit immediately from the executional advantages of increased focus and end-to-end integration, while we modernize our supply chain and substantially improve our profit margins. We’re on a profitable journey to take this great business to the next level.”

Spin-off timeline
On June 21, 2022, Kellogg Company announced that its Board of Directors had approved a plan to pursue a separation of its North American cereal business (“WK Kellogg”) via a tax-free spin-off.

Initially, the business was to be divided into three companies – Global Snacking, North America Cereal and Plant –; however, the company decided not to create an independent plant-based business earlier this year.

In July, Kellogg’s filed a Form 10 registration statement with the US Securities and Exchange Commission (SEC) to separate into two businesses: Kellanova and WK Kellogg.

By Marc Cervera


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