Kellogg sells Keebler to Ferrero Rocher for $1.3 billion

Kellogg share price is down 2% after selling its Keebler cookie division to Ferrero Rocher for $1.3 billion. The deal is expected to be completed by July.

Why is Kellogg selling Keebler cookies?

Kellogg is selling its cookie business with brands like Famous Amos after struggling with sales of its prepackaged foods over the past year. The Ferrero Group purchased the snack division after Kellogg restructured its business to focus on other snack brands like crisps maker Pringles. Kellogg chief executive officer, (CEO), Steve Cahillane, said in a statement that the sale was a chance for the food company to increase their profits.

‘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,’ said Cahillane.

‘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,’ added Cahillane.

Ferrero Group chief executive officer, Lapo Civiletti, touted the addition of the Keebler brand as a way to expand the company’s portfolio in a statement.

‘We are acquiring a portfolio of well-established brands that consumers love, with very strong market positions across their respective categories, allowing us to significantly diversify our portfolio and capitalize on exciting new growth opportunities in the world’s largest cookies market,’ said Civiletti.

What’s next for Kellogg and Ferrero Rocher?

Kellogg is going to take the proceeds of the all-cash deal to settle its debt. The food company also will focus on its e-commerce division to try to bolster profits. Kellogg is readjusting its focus to offer healthier options like the nutrition bar RXBAR to customers as consumers buy more granola bars and fewer cookies. Giovanni Ferrero, executive chair of the Ferrero group, hopes that this latest acquisition will help the Italian company expand its reach into the North American consumer market.

‘Kellogg Company’s cookie, fruit snack, ice cream cone and pie crust businesses are an excellent strategic fit for Ferrero as we continue to increase our overall footprint and product offerings in the North American market,’ said Ferrero.