Kellogg Company (NYSE: K), a premier food producer, will split its business up into three separate companies. The Board of Directors announced on June 21 that the company will separate its North American cereal and plant-based food businesses.
Further, the three new entities’ names will be determined later, but they would be the following, “Global Snacking Co.” would represent a leading company in global snacking, international cereal and noodles, and frozen breakfasts, with a rough estimate of $11.4 billion in sales.
The next one would be “North American Cereal Co.” a leading cereal company in the U.S., Canada, and the Caribbean with about $2.4 billion in sales. Lastly, “Plant Co.” would be a pure-play plant-based food company with sales of about $340 million.
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Meanwhile, in pre-market trading, the stock is up over 6% on the news of the split. In general, in 2022, the shares are up over 4%, representing one of the rare stocks that are in the green for the year.
With the pre-market move, the shares are now trading above all daily Simple Moving Averages (SMAs).
On the other hand, analysts rate the shares a hold, predicting that the next 12 months’ average price could reach $71.67, which is 6.10% higher than the last trading price of $67.55
The rationale behind the split possibly lies in the fact that strong brand names like Pringles and Pop-Tarts will make the snacking side of the business a better growth company.
Further, the play on plant-based foods could be an attempt to take on incumbents in the field like Beyond Meat (NASDAQ: BYND) and offer more choices to health-conscious consumers.
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