Kellogg selling Keebler and other brands for $1.3 billion

Kellogg selling Keebler and other brands for $1.3 billion

"We have great respect for Kellogg, its legacy and values, and are proud that Kellogg has chosen Ferrero as a good home for these businesses", Giovanni Ferrero, executive chairman of Ferrero Group said in a statement. In 2018, these product lines recorded sales of almost $900 million, Kellogg said.

The cash transaction is expected to close by the end of July.

The $1.3 billion sale also gives Ferrero Kellogg's production facilities in Chicago, Augusta, Ga., Florence, Ky., Louisville, Ky., Allyn, Wash. It also includes its fruit and fruit-flavoured snacks, pie crusts, and ice cream cones businesses.

Kellogg has been trying to sell off those brands since November.

For Ferrero, the acquisition is a way to expand its North American business.

Kellogg's will retain the remainder of its North American snacks business, including crackers, salty snacks and toaster pastries, among other products.

Since Mr Cahillane took up Kellogg's reins in 2017, the packaged-food maker - based in Battle Creek, Michigan - has shifted its priority to increasing sales, instead of cutting costs.

Kellogg acquired Keebler Foods, founded in 1853, in 2001 for $3.86 billion.

For Kellogg, the long-awaited divestiture marks another step in its plan to streamline its portfolio to jettison slow-growing or under-invested brands. General Mills Inc has said it wants to divest about 5% of its portfolio.

Wells Fargo analyst John Baumgartner said that the sale could provide a "halo effect" for Kellogg's, which is holding on to Keebler's cracker business, if Ferrero invests in marketing Keebler.

"With this transaction, I look forward to bringing many iconic Kellogg brands into the Ferrero portfolio".

Kellogg is among many USA food companies that have sold off brands in recent years to adapt to a consumer shift toward more fresh, less processed snacks and foods.

Ferrero came in ahead of Hostess Brands in the bidding war to acquire Keebler through something known as a "Reverse Morris Trust", an unorthodox deal that allows a tax-efficient combination of two companies of a similar size.

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