Kellogg sells biscuit business to Ferrero for US$1.3b

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

The businesses generated sales of about US$900 million in 2018, the companies said Monday. 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 US, plus a leased facility in Baltimore.

"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."

Ferrero, the Italian maker of Nutella spread, has been on an acquisition spree while Kellogg has been seeking to simplify its corporate structure as it struggles to ignite growth in its US cereal and snacks businesses. 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," Giovanni Ferrero, Executive Chairman of the Ferrero Group, said in a statement.

Since Mr Cahillane took Kellogg's reins in 2017, the Battle Creek, Michigan-based packaged-food maker 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, he said that 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 isn't alone in seeking to lighten its portfolio - fellow packaged-food giants are trying to shed lethargic brands in a bid to maximize sales and profit. General Mills Inc has said it wants to divest about 5 per cent of its portfolio. Campbell Soup Co also 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 SA's US candy business, owner of the Butterfinger and Baby Ruth brands, for US$2.8 billion. The company also was said to be among suitors expressing early interest in buying international and fresh food businesses being sold by Campbell.

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