US-based breakfast cereal and snacks maker Kellogg has confirmed it has agreed to sell its cookies, fruit and fruit-flavoured snacks, pie crusts, and ice cream cones businesses to Italy-based confectionery maker Ferrero for US$1.3bn.
Kellogg said in a statement today (1 April) the all-cash transaction remains subject to customary closing conditions and regulatory approvals, but if cleared, the deal should close by the end of July.
Michigan-based Kellogg announced a plan to sell the business units – including the Keebler and Famous Amos brands – last November to “enable the company to bring a sharper focus to its core businesses”.
At the time, chief executive and chairman of the New York-listed firm, Steve Cahillane, said Kellogg needed to “make strategic choices about our business and these brands have had difficulty competing for resources and investments within our portfolio”.
Kellogg confirmed today the cookies assets to be acquired by Nutella spreads maker Ferrero also include the brands Mother’s , Murray’s and Murray’s Sugar Free, as well as cookies manufactured for Girl Scouts of the USA.
In a statement from Ferrero acknowledging the completion of the deal, the company also confirmed the transaction includes Kellogg’s fruit snacks business units, Stretch Island and Fruity Snacks, along with Keebler’s ice cream cones and pie crust products.
The deal includes production facilities in Augusta, Georgia; Florence, Kentucky; Louisville, Kentucky; Allyn, Washington; and Chicago, Illinois.
Cahillane said today: “This divestiture is yet another action we have taken to reshape and focus our portfolio, which will lead to reduced complexity, more targeted investment, and better growth. Divesting these great brands wasn’t an easy decision, but we are pleased that they are transitioning to an outstanding company with a portfolio in which they will receive the focus and resources to grow.”
Meanwhile, Kellogg retains the rest of its North America snacking businesses encompassing crackers, salty snacks, “wholesome” snacks, and toaster pastries.
Kellogg said the assets acquired by Ferrero under the deal recorded sales last year of almost $900m and generated operating profits of about $75m. It added that assuming the sale proceeds are only used to reduce debt, the transaction “is expected to be less than 5% dilutive to Kellogg’s projected 2019 currency-neutral adjusted earnings per share”.
With the deal, Ferrero expands its presence in the North American market after acquiring the US confectionery business of Swiss food giant Nestlé last year, and Illinois-based Ferrara Candy Co. and Fannie May Confections Brands in the US the previous year.
Giovanni Ferrero, the executive chairman of Ferrero, said: “Kellogg Company’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.
“With this transaction, I look forward to bringing many iconic Kellogg brands into the Ferrero portfolio, to welcoming our new colleagues to the extended Ferrero community, and to continuing Ferrero’s strong track record of growing brands, as we have through our successful acquisitions of Fannie May, Ferrara Candy Company , and the former Nestlé US confectionery business.”