Kellogg Company has reached a definitive agreement to sell selected cookies, fruit and fruit-flavoured snacks, pie crusts, and ice cream cones businesses to global confectionery group Ferrero.

The cash transaction is valued at $1.3 billion (or €1.16 billion, at the current exchange rates), and includes brands and assets primarily related to these businesses. Subject to customary closing conditions, including any applicable regulatory approvals, the transaction is expected to close by the end of July. 

“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 Steve Cahillane, chairman and chief executive officer, Kellogg.

“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,” he added. 

The divestiture represents a portion of Kellogg’s North America snacking business.  Specifically, it includes its cookies business, including brands like Keebler, Mothers, Famous Amos, Murrays,and Murrays Sugar Free, as well as cookies manufactured for Girl Scouts of the USA.

The transaction includes production facilities in Augusta, Georgia; Florence, Kentucky; Louisville, Kentucky; Allyn, Washington, and Chicago, Illinois.

In 2018, these businesses recorded net sales of nearly $900 million and operating profit of approximately $75 million, including estimated indirect corporate expenses. Assuming the cash proceeds are used only to reduce outstanding debt, the transaction is expected to be less than five per cent dilutive to Kellogg’s projected 2019 currency-neutral adjusted earnings per share.

Kellogg will retain the rest of its North America snacking businesses, including its crackers, salty snacks, wholesome snacks, and toaster pastries brands.

“On behalf of our entire company, I want to thank the many employees who support these businesses and have contributed to the strength of these brands,” Cahillane said, adding, “We appreciate their passion, commitment and everything they have done for Kellogg.  These talented individuals are going to a first-class organisation in Ferrero, wher they undoubtedly will thrive.”

Evercore was lead advisor to Kellogg on the transaction, with Goldman Sachs acting as co-advisor. Wachtell, Lipton, Rosen and Katz acted as legal counsel.