Kellogg Divests Keebler Cookies, Related Businesses to Ferrero

As part of its ongoing campaign to reshape its portfolio, the Kellogg Co. is selling the majority of its North America snacking and cookie businesses—including the Keebler, Mother’s, Famous Amos and Murray brands, as well as cookies manufactured for Girl Scouts of the USA—along with its fruit-flavored and fruit snacks, pie crusts and ice cream cone businesses, to Ferrero Group and its related companies.

The cash transaction is valued at $1.3 billion and includes Kellogg production facilities in Augusta, Ga.; Florence and Louisville, Ky.; Allyn, Wash.; and Chicago. The deal is set to close in July, pending customary closing conditions and applicable regulatory approvals.

“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,” Steve Cahillane, Kellogg’s chairman and CEO, said in a statement. “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 said the businesses slated for divesture to Ferraro recorded net sales of nearly $900 million and operating profit of approximately $75 million in 2018, including estimated indirect corporate expenses. Assuming the proceeds are used solely to reduce outstanding debt, the transaction is expected to be less than 5% dilutive to the Battle Creek, Mich.-based CPG company’s projected 2019 earnings per share estimate.

Aside from the businesses included in the divesture, Kellogg plans to retain the remainder of its North America snacking businesses, including its crackers, salty snacks, wholesome snacks and toaster pastry brands.

Cahillane expressed thanks to “the many employees who support these businesses and have contributed to the strength of these brands. We appreciate their passion, commitment and everything they have done for Kellogg. These talented individuals are going to a first-class organization in Ferrero, where they undoubtedly will thrive.”

Ferrara Candy Co., a related company of the Ferrero Group, has a diverse portfolio of nearly 35 other brands, including SweeTarts, Trolli, Brach’s, Black Forest, Butterfinger, Crunch, Laffy Taffy and Nerds, along with iconic classics such as Lemonhead, Red Hots and Now and Later. With headquarters in Chicago, the company has an operational network of manufacturing, distribution and research and development facilities across North America.

Founded as a family business in Alba, Italy, in 1946, Ferrero is ranked as the third-largest company in the global chocolate confectionary market. With global sales of more than $12 billion and distribution across 170 countries, Ferrero entered the U.S. in 1969 with Tic Tac breath mints and has since expanded its brand presence through its other popular products, such as Ferrero Rocher hazelnut chocolates, Nutella, Kinder Joy and Fannie May chocolates. Evercore was lead adviser to Kellogg on the transaction, with Goldman Sachs acting as co-adviser.