Kellogg is joining the corporate vogue for splitting itself in three. The breakup might boost the valuation eventually, but the unknowns explain the market’s frosty reception, writes dasha_reuters.
Add the three together and the implied total enterprise value is $36 billion, 20% above what it was before the announcement. But that uplift doesn’t take into account the transaction costs, market risk and additional overheads involved in turning one company into three. Given the many unanswered questions about the financial structure, it’s little wonder that Kellogg shares rose less than 4% on Tuesday., which straddles toiletries and food.
The Frosties maker said it would spin off its North American cereal unit, which generated $2.4 billion in net sales in 2021, and its plant-based foods subsidiary with $340 million in net sales. The remaining company will keep Kellogg’s snack foods and international cereals businesses, which generated $11.4 billion of net sales in 2021. The names of the three companies will be determined later.
Kellogg said the separations, which would be conducted via tax-free spinoffs, would be completed by the end of 2023. Kellogg Chairman and Chief Executive Steve Cahillane will run the global snacking business.Register now for FREE unlimited access to Reuters.com
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