Kellogg Company (NYSE:K) has said it will split into three independent companies in an overhaul aimed at simplifying its structure and focusing on expanding its snack business.
The breakup of the Pringles, Cheez-It and Pop-Tarts maker would result in the creation of a global snacking business that would also house its international cereal and noodles brands and its North America frozen breakfast division. The business brought in net sales of $11.4 billion in 2021, accounting for 80% of its total revenue.
Its North American cereal unit and plant-based segment, which includes brands such as MorningStar Farms, will be spun off to its shareholders in a tax-free transaction, the Frosted Flakes and Froot Loops cereal maker said.
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"These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities," Kellogg chief executive officer Steve Cahillane said in a statement.
The Battle Creek, Michigan-based company has in recent years focused on its global snacking portfolio, as sales of US cereals have declined with more Americans taking to snacking and relying on fast-food chains for breakfast.
The decision by Kellogg to split follows similar announcements by global conglomerates such as Johnson & Johnson (NYSE:JNJ) and General Electric (NYSE:GE) Co in the past year.
Kellogg said it expects the spin-offs to be completed by the end of 2023, adding that it was also exploring strategic options for its plant-based business including a possible sale.
The snacks business, which will be the biggest post the split, would be helmed by current Kellogg CEO Cahillane.
The company said its North American cereal business and the plant-based focused company will remain headquartered in Battle Creek, Michigan. While the snacking-focused company will maintain dual campuses in Battle Creek and Chicago, Illinois.
Michael Hewson, chief market analyst at CMC Markets UK commented: "The three companies, whose final names haven’t yet been decided, will be 'Global Snacking' which will generate about $11.4bn in sales. North American Cereal' company will focus on the US, Canada and the Caribbean and 'Plant Co' will be a plant-based foods company."
"Sadly, there is no truth in reports that they will be called Snap, Crackle and Pop, because Snap is already taken," he added.
Shares of the snack and cereal giant, which began life in 1894 when W.K Kellogg created Corn Flakes, jumped 4% in New York morning trading to $70.49.
Contact the author at jon.hopkins@proactiveinvestors.com