Kellogg sells Keebler to Ferrero for $1.3 billion

Kellogg Co. plans to sell part of its North America snacking business, including the Keebler brand, to Ferrero Group for $1.3 billion.

The companies said Monday that the deal includes the Kellogg North America cookies business — Keebler, Mother's, Famous Amos, Murray’s, Murray's Sugar Free and Little Brownie Bakers, which manufactures cookies for the Girl Scouts — plus the Kellogg fruit snacks business, including Stretch Island and Fruity Snacks, and Keebler’s ice cream cones and pie crust products. Last year, those businesses generated sales of nearly $900 million, Kellogg reported.

With the transaction, expected to close by the end of July, Ferrero also will acquire six Kellogg food manufacturing facilities in Allyn, Wash.; Augusta, Ga.; Florence and Louisville, Ky.; and Chicago (two plants), along with a leased manufacturing facility in Baltimore.

Kellogg had announced in November, just before its 2018 investors conference, that it was putting its North America cookies and fruit snack businesses on the sales block as part of a companywide reorganization. That effort included the consolidation of the company’s U.S. morning foods, snacks and frozen food business units into one categories-focused organization comprising 80% of Kellogg North America’s revenue.

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"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," Kellogg Chairman and CEO Steve Cahillane said in a statement Monday. "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." 

Kellogg noted that it will retain the rest of its North America snacking businesses, including its crackers, salty snacks, wholesome snacks, and toaster pastries brands. The Battle Creek, Mich.-based company had sales of $13.5 billion in 2018, and its portfolio of cereal, snack and frozen food brands includes Kellogg's Corn Flakes, Special K, Kellogg's Frosted Flakes, Rice Krispies, Mini-Wheats, Kashi, Pringles, Cheez-It, Pop-Tarts, Eggo, and RxBar, among others.

For Luxembourg-based Ferrero, the deal brings the company into new product categories in the North American market, where it has acquired several U.S. brands and businesses.

In March 2018, Ferrero closed its $2.8 billion acquisition of the Nestlé U.S. confections business, which had sales of about $900 million and more than 20 brands, such as Butterfinger, BabyRuth, 100Grand, Raisinets, Wonka, Crunch, SweeTarts, LaffyTaffy and Nerds. The deal made Ferrero the third-largest confections company in the U.S. market.

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“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,” said Giovanni Ferrero, executive chairman of the Ferrero Group. “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 Co. and the former Nestlé U.S. confectionary business.”

Kellogg said it expects to close the transaction with Ferrero by the end of July, pending regulatory approval and other customary closing conditions.