Kellogg (K) stock jumps after announcing to split into three companies

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Kellogg (K) stock jumps after announcing to split into three companies

 Kellogg (K) stock jumps after announcing to split into three companies
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Highlights:

  • Kellogg Company (NYSE: K) announced to split the business into three companies.
  • Post the split, Kellogg Chairman and CEO Steve Cahillane will lead the snack business.
  • Kellogg was founded in 1906.

 

The Kellogg Company (NYSE: K) stock rose 2.25% to US$69.0628 at 10:28 am ET on Tuesday after announcing plans to split the business into three independent companies.

The company’s board of directors has approved the split via a tax-free spin-off. The Kellogg Company is one of the leading global cereal and plant-based foods businesses based in the US.

According to experts, the consumer staples company is going for a corporate overhaul to simplify its structure and expand its snack business amid an inflation-burdened economy.  

Last year, General Electric Co (GE) and Johnson & Johnson (JNJ) also announced splitting their businesses and restructuring to focus more on specific segments. 

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Kellogg expects to complete the process by 2023. It also said in a press note that the spun-off companies would be named Global Snacking Co., North America Cereal Co., and Plant Co. 

Post the split, the snack business will be the biggest and will be led by Steve Cahillane, the current Chairman and CEO of Kellogg.

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Commenting on the decision, Cahillane said it is a step towards transforming the company to create long-term value for shareowners.

He added that these businesses have significant standalone potential, and an enhanced focus on them would help utilize the resources better to achieve strategic priorities. 

The snacking business company will have dual campuses in Battle Creek and Chicago, Illinois. The other two businesses: Cereal Co. and Plant Co., will be headquartered in Battle Creek, Michigan. 

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Kellogg said the three companies could better focus on their business priorities and financial targets after the split. They will have more operational flexibility and agility to allocate resources and tap the respective markets and opportunities. It added that the employees of the new companies would have a more rewarding growth path. 

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Kellogg stock

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The Kellogg Company was founded by W.K Kellogg in 1906. Its cornflakes business has been very successful, but it also manufactures cereals, crackers, cookies, etc., for global consumers. 

Its products are manufactured in 21 countries and marketed in over 180 countries. Its many popular brands include Cheez-It, Pop-Tarts, Frosted Flakes, Morningstar Farms, and Kashi.

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Financials:

In the quarter ended April 2, 2022, Kellogg booked net sales of US$3.67 billion compared to US$3.58 billion in the corresponding quarter of 2021. Its net income was US$422 million or US$1.23 per share diluted versus US$368 million or US$1.07 per share diluted a year ago. 

The company’s current market capitalization is US$23.26 billion, and the P/E ratio is 15.33. Its dividend yield is 3.43%, and the annualized dividend is US$2.32. 

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Bottom line:

The Kellogg (K) stock traded in the range of US$75.56 to US$59.54 in the last 52 weeks. It rose 5.25% in one year and 4.42% YTD at the closing price of US$67.54 on June 17, 2022.   

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