Kellogg Co., headquartered in Battle Creek, has announced a significant corporate restructuring as its board of directors officially greenlights the company’s previously disclosed plan to divide into two separate publicly traded companies. The separation, slated for October 2nd, marks a strategic move to enhance focus and growth opportunities within their respective markets.
Two Distinct Entities Emerge
Following this separation, Kellogg Co. will be reborn as Kellanova, continuing to be listed on the New York Stock Exchange under the ticker symbol “K.” Meanwhile, a new venture, WK Kellogg Co., will emerge as a prominent player, trading under the ticker symbol “KLG” on the NYSE. These two entities are poised to unlock their potential in different niches of the food industry.
Kellanova will retain its focus on the North American cereal market, with iconic brands like Froot Loops and Frosted Flakes under its purview. On the other hand, WK Kellogg Co. will delve into the global snack foods market while seeking growth opportunities abroad.
CEO’s Vision and Confidence
Steve Cahillane, the Chairman and Chief Executive Officer of Kellogg Co., expressed his confidence in this strategic decision, stating, “After more than a year of comprehensive planning and execution, we are more confident than ever that the separation will produce two stronger companies and create substantial value for shareholders.” Importantly, Mr. Cahillane will continue to lead as Chairman and CEO of Kellanova after the separation.
The separation plan includes significant benefits for Kellogg shareholders. On October 2nd, at 12:01 a.m., Kellogg shareowners of record as of September 21st will receive one share of WK Kellogg Co. for every four shares of Kellogg Co. they own. This move aims to ensure a smooth transition and equitable distribution of assets.
A Shift in Corporate Strategy
Kellogg Co. first announced its intention to split into three separate companies in June 2022. Initially, the plan included a cereal business, a plant-based food company, and a snack company. However, in February, Kellogg Co. decided to retain the plant-based food business, MorningStar Farms. Consequently, the current plan emphasizes a clearer division of the remaining entities, sharpening their market focus.
Kellogg’s snack food division, encompassing beloved brands such as Pringles and Pop-Tarts, contributes significantly to the company’s revenue. Company officials anticipate that Kellanova is set to generate net sales ranging from $13.4 billion to $13.6 billion and adjusted-basis earnings before interest, taxes, depreciation, and amortization of $2.25 billion to $2.3 billion by 2024. This projection underlines the company’s commitment to future growth.
WK Kellogg Co., with its net sales projection of $2.7 billion and adjusted-basis earnings before interest, taxes, depreciation, and amortization estimated between $255 million and $265 million in 2024, is determined to strengthen its position by enhancing commercial strategy and modernizing its supply chain.
Gary Pilnick will step into the role of Chairman and Chief Executive Officer of WK Kellogg Co. following the separation. Pilnick expressed enthusiasm for this transition, stating, “As a standalone company, we will benefit immediately from the executional advantages of increased focus and end-to-end integration, while we modernize our supply chain and substantially improve our profit margins. We’re on a profitable journey to take this great business to the next level.”
The approved division of Kellogg Co. into Kellanova and WK Kellogg Co. represents a strategic shift that positions both entities to thrive in their respective markets, with an unwavering commitment to delivering value to shareholders and consumers alike. The separation is a testament to Kellogg’s dedication to evolution and growth in the ever-changing food industry landscape.