Kellogg reorganizes and splits into three companies 1:12
New York (CNN Business) --
Kellogg is splitting into three different companies in a major restructuring of the 116-year-old company.
The first company will include Kellogg's North America's cereal unit, which includes Raisin Bran and Rice Krispies, its snacks and snacks unit will become a second company, including Cheez-Its and Pringles.
And finally, a new "plant-based food company" that will be based on its MorningStar Farms brand.
Kellogg's sued for $5 million alleging Pop-Tarts don't have enough strawberries
The new names of the spun-off companies will be announced later, with completion expected by the end of 2023. The board of directors has already approved the plans and the locations of the three units will not change.
"Kellogg has embarked on a successful transformation journey to improve performance and increase long-term shareholder value," Kellogg CEO Steve Cahillane said in a statement. "All of these businesses have significant stand-alone potential, and greater This approach will allow them to better direct their resources towards their various strategic priorities.
The shares rose more than 8% in premarket trading.
Its shares are up more than 4% for the year.
Kellogg explained that spinning off the companies "will better position each business to unleash its full potential," especially as the company has grown through acquisitions in recent years.
Further focusing startups will help them grow with "financial goals that better fit their own markets and opportunities."
The snack food business will be by far the biggest new venture.
Kellogg said it raked in more than $11 billion in sales last year, and is a "faster growth company than the current Kellogg Company."
About 60% of its sales come from Pop-Tarts, Nutri-Grain, Pringles and Cheez-It products.
Why are giant companies suddenly splitting up?
Last year, Kellogg was embroiled in an 11-week strike at four grain plants, including one in Battle Creek, Michigan, the company's hometown.
The new five-year deal includes a ban on closing any plant during the life of the contract and a cost-of-living wage increase to protect workers from rising prices.
Kellogg joins a number of companies that are breaking up to promote growth.
Johnson & Johnson, Toshiba and GE announced similar plans last year.
"In order to survive and keep up with market trends, companies need to look at what their most profitable lines of business are and where they should spend the most time and focus," said Liz Young, chief investment strategist at SoFi, speaking earlier to CNN Business.
"The competition is fierce. Sometimes you have to break it down to build it up again."
Kellogg's
