By Louis Juricic
Kellogg (NYSE:K) shares rose 7% in pre-open trading Tuesday on plans to split into three independent public companies, Global Snacking, North America Cereal, and Plant Co. The actual names will be determined later.
The company that remains after two planned spinoffs, Global Snacking, will have the most revenue, with $11.4 billion in net sales compared to $2.4 billion for North America Cereal, and just $340 million for Plant.
Global Snacking is expected to be a higher-growth company than today's Kellogg, and management is probably hoping investors will be willing to assign the stock a higher multiple as a result. The planned separation is expected to enhance the new unit’s leadership position in the global snacking, international cereal and noodles, and North America frozen breakfast categories, by focusing investments and capital toward building upon its strong growth.
The first spinoff's portfolio is comprised of iconic brands such as Kellogg's, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi, and Bear Naked. The new company will have a greater strategic focus and operational flexibility and will direct capital and resources toward unlocking growth, regaining category share, and restoring and expanding profit margins
Kellogg also intends to separate Plant Co. as an independent business, while also exploring other strategic alternatives, including a possible sale. Plant Co. includes the MorningStar Farms Brand. Some investors may view an independent company as better positioned to compete with alternative-meat companies like Beyond Meat (NASDAQ:BYND) and Impossible Foods.