Kellogg (K) officially splits its bowl in two.
The iconic 117-year-old maker of Pringles and Frosted Flakes will split into two companies today after working on the separation since June 2022.
Shares initially rose in premarket trading but fell more than 6% before the opening bell.
Kellanova will house well-known snack brands such as Pringles, Cheez-It and Pop-Tarts, as well as the company’s plant-based food business, Morningstar.
The Kellanova business, which current Kellogg CEO Steve Cahillane will lead, will trade on the New York Stock Exchange under Kellogg’s current ticker symbol “K.”
According to Kellogg, the Kellanova name is intended to honor the company’s heritage while signaling a new era of growth in a still-expanding snack industry.
The traditional cereal company, which has names like Froot Loops and Corn Flakes, will be called WK Kellogg Co – a nod to company founder William Keith Kellogg.
The company’s ticker symbol, “KLG,” also trades on the New York Stock Exchange.
Tony The Tiger speaks during the “Tony The Tiger” press conference introducing Tony’s new look at 620 Loft & Garden on September 15, 2016 in New York City. (Kris Connor/Getty Images)
At the time of the 2022 separation announcement, Cahillane told Yahoo Finance Live the decision reflected his view that the market was not adequately appreciating Kellogg’s fast-growing snacks business and cost-cutting efforts.
Cahillane also led another transformational transaction as CEO: the sale of Kellogg’s Keebler cookie business in 2019.
Despite a generally well-received investor day a few weeks ago, Wall Street remains cautious on both deals.
For Kellanova, pros told Yahoo Finance that the company needs to spur revenue growth in its key business areas. Additionally, the company still needs to work on improving its international presence.
“While management forecast long-term organic growth of +3-5% on the investor day, in our view there could be potential short-term risk as North America still accounts for approximately 50% of Kellanova’s pro forma sales Retail volumes in the U.S. tracked channel fell about 9%, a pace that has continued over the past few months,” Jefferies analyst Rob Dickerson wrote in a note to clients.
The story goes on
Dickerson added: “With significantly higher prices compared to two years ago, diminishing price advantages and struggling U.S. consumers, we believe this is putting pressure on the company to reinvest to fuel growth.”
As for WK Kellogg Co, the sentiment on the Street is that the company needs to improve its margins by cutting costs in a slow-growing grain industry.
Brian Sozzi is Editor-in-Chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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