Kellogg news about the company’s decision to sell its Keebler business has K stock down on Monday.
This deal will has Kellogg (NYSE:K) selling Keebler, as well as other related businesses, to confectionery company Ferrero. Ferrero is willing to pay a pretty penny for the business too. It will spend $1.30 billion in cash to acquire Keebler.
The Kellogg news means that Ferrero is going to be responsible for several brands under the Keebler banner. This includes Mother’s, Famous Amos, Murray’s, and Murray’s Sugar Free. It will also have it handling the creation of cookies sold by the Girl Scouts of the U.S.A.
The deal between the two companies will have Ferrero obtaining a strong business. Keebler and the other businesses were responsible for $900 million in net sales and $75 million in operating profit during 2018.
“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 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.”
According to Kellogg, it is expecting the deal to be less than 5% dilutive to its earnings per share in 2019. It notes that this is assuming that the cash from the deal is used to pay down outstanding debt.
K stock was down 1% as of noon Monday.
As of this writing, William White did not hold a position in any of the aforementioned securities.