Kraft reveals plans to split business into two independent, publicly traded companies
NORTHFIELD, Ill. — Kraft Foods is planning to create two independent public companies, which will include a global snacks business and a North American grocery business.
The company expects to create these companies — the high-growth global snacks business, which carries an estimated revenue of approximately $32 billion and the high-margin North American grocery business, which touts an estimated revenue of approximately $16 billion — through a tax-free spinoff of the North American grocery business to Kraft Foods shareholders.
The announcement was in line with the release of Kraft's second-quarter results, which included a 13.3% increase in net revenues to $13.9 billion and operating earnings per share of 62 cents, a 3.3% rise. The company also boosted its expectations for organic net revenue growth from at least 4% to at least 5%, and operating EPS from at least $2.20 to at least $2.25.
"As our second-quarter results once again show, our businesses are benefiting from a virtuous cycle of growth and investment, which we fully expect will continue," Kraft chairman and CEO Irene Rosenfeld said. "We have built two strong, but distinct, portfolios. Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realize their full potential."
Kraft said its global snacks will consist of the current Kraft Foods Europe and Developing Markets units, as well as the North American snacks and confectionery businesses. The North American grocery business would consist of the current U.S. beverages, cheese, convenient meals and grocery segments and the nonsnack categories in Canada and food service.
"The next phase of our development recognizes the distinct priorities within our portfolio," Rosenfeld said. "The global snacks business has tremendous opportunities for growth as consumer demand for snacks increases around the world. The North American grocery business has a remarkable set of iconic brands, industry-leading margins, and the clear ability to generate significant cash flow."