Kellogg Stock Surges Amid Plans to Split Iconic Cereal Maker Into Three Separate Companies

© The Street

By Martin Baccardax

"These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities," said CEO Steve Cahillane.

Kellogg (K) - Get Kellogg Company Report shares surged higher Tuesday after the venerable packaged food group said it will split into three separate companies.

The iconic cereal brand will spin-off its snacks business, which represents around 80% of its overall sales, into a stand-alone public company focused on business divisions such as frozen breakfast, noodles and snack foods with a new global headquarters to be based in Chicago.

Kellogg's cereal business, which accounts for around 20% of sales and has been considered a drag on the company's recent growth, will form a second stand-alone group while its developing plant-based food division will form the third separate company. Both groups will remain based in Battle Creek, Michigan.

"Kellogg has been on a successful journey of transformation to enhance performance and increase long-term shareowner value. This has included re-shaping our portfolio, and today's announcement is the next step in that transformation," said CEO Steve Cahillane.

"These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities," Kellogg said. "In turn, each business is expected to create more value for all stakeholders, and each is well positioned to build a new era of innovation and growth."

Kellogg shares were marked 6.5% higher in pre-market trading to indicate an opening bell price of $71.95 each.

Kellogg posted stronger-than-expected first quarter earnings of $1.10 per share last month, with revenues rising 2.4% to $3.67 billion, but cautioned that raw materials shortages and supply chain snarls would trigger near-term price hikes.