Kellogg selling cookie, snack brands to Ferrero for $1.8b

Keebler is among the brands being sold to Ferrero. Kellogg bought Keebler in 2001 for over US$4 billion in cash and assumed debt.
Keebler is among the brands being sold to Ferrero. Kellogg bought Keebler in 2001 for over US$4 billion in cash and assumed debt.PHOTO: BLOOMBERG

TOKYO • Kellogg has agreed to sell its cookies and fruit snack brands, including Keebler and Famous Amos, to Ferrero SpA for US$1.3 billion (S$1.8 billion), as the cereal maker refocuses on the fast-growing parts of its business.

The businesses generated sales of about US$900 million last year, the companies said yesterday.

The all-cash transaction is expected to close by the end of July. As part of the deal, Ferrero will acquire six US food manufacturing facilities across the United States, plus a leased facility in Baltimore.

"Divesting these great brands wasn't an easy decision," Kellogg chief executive Steve Cahillane said in a statement. "It will lead to reduced complexity, more targeted investment and better growth."

Ferrero, the Italian maker of Nutella spread, has been on an acquisition spree.

Kellogg has been seeking to simplify its corporate structure as it struggles to ignite growth in its US cereal and snacks businesses.

It announced last year that it was looking for buyers for the snacks businesses as part of its strategic plan.

Mr Giovanni Ferrero, executive chairman of the Ferrero Group, said in a statement: "Kellogg Co's cookie, fruit snack, ice-cream cone and pie crust businesses are an excellent strategic fit for Ferrero as we continue to increase our overall footprint and product offerings in the North American market."

Since Mr Cahillane took up Kellogg's reins in 2017, the packaged-food maker - based in Battle Creek, Michigan - has shifted its priority to increasing sales, instead of cutting costs. The goal has become tougher to achieve as consumers move away from packaged food and cereal has lost popularity with Americans.

Kellogg bought Keebler in 2001 for more than US$4 billion in cash and assumed debt.

In an interview in January, Mr Cahillane said divesting the brands "would take a big portion of the sales out of our portfolio, but it's sales that are declining replaced by sales that are growing".

Kellogg is not alone in seeking to lighten its portfolio. Fellow packaged-food giants are also trying to shed lethargic brands in a bid to maximise sales and profit. General Mills has said it wants to divest about 5 per cent of its portfolio, while Campbell Soup wants to sell parts of its business.

Ferrero has been one of the companies ready to snap up more brands. The company last year agreed to buy Nestle's US candy business, owner of the Butterfinger and Baby Ruth brands, for US$2.8 billion.

The company was also said to be among those expressing early interest in buying international and fresh food businesses being sold by Campbell.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on April 02, 2019, with the headline 'Kellogg selling cookie, snack brands to Ferrero for $1.8b'. Print Edition | Subscribe