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Kellogg Agrees To Sell Its Snacks To Ferrero For $1.3 Billion

Kellogg Agrees To Sell Its Snacks To Ferrero For $1.3 Billion
With the aim of shifting focus to its business units and products that are fast growing, Kellogg Co. has decided to divest its cookies and fruit snack brands – which would include Keebler and Famous Amos brands – to a Ferrero SpA in a deal worth for $1.3 billion.
The companies said Monday that the businesses being given up by the company generated about $900 million in sale in 2018.
The companies expect that the all-cash deal would be closed by the end of July. In addition to a leased facility in Baltimore, Ferrero will acquire six US food manufacturing facilities as part of the deal.
“Divesting these great brands wasn’t an easy decision," Steve Cahillane, Kellogg’s chief executive officer, said in a statement. It “will lead to reduced complexity, more targeted investment, and better growth."
While the focus of Kellogg has been on making its corporate sector very simple as the company is struggling to spark growth for itself in its crucial market of the United States for its cereal and snacks businesses, the Italian maker of Nutella spread - Ferrero, has been making a number of acquisitions lately. Kellogg announced last year it was looking for buyers for the snacks businesses as part of its strategic plan.
“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, in a statement.
The priority of the Battle Creek, Michigan-based packaged-food maker has shifted to making more sale rather than on cutting down on costs ever since Steve Cahillane took over charge of Kellogg in 2017. But in recent times, there has been a tendency of consumers to slowly move away from as packaged food and cereal has lost popularity with Americans, achieving the goal for the company has been a tough to achieve. 
Kellogg bought Keebler in 2001 for more than $4 billion in cash and assumed debt.
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", Cahillane had said in an interview in January.
But Kellogg is not the only company in the effort to shorten its portfolio. There are a number of packaged-food giants that are trying to divest the slow performing brands in their portfolio so that the companies are able to maximize sales and profit. It wants to divest about 5% of its portfolio, General Mills Inc. has said. Campbell Soup Co. also wants to sell parts of its business.
Ferrero of late has been on an acquisition spree of similar brands. Nestle SA’s US candy business, owner of the Butterfinger and Baby Ruth brands, was agreed to be bought by the company last year in a deal worth $2.8 billion.

Christopher J. Mitchell

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