Nutella-owner Ferrero and Hostess Brands are contending as favorites to buy Kellogg’s Keebler and other businesses such as Famous Amos and their fruit snacks. The brand’s value could end up with a deal of around $1.5 billion.
Taking advantage of the stir across the food business, Hostess and Ferrero came up with a deal for Keebler. With many big food companies abandoned their brands to focus more on moneymakers. Ferrero and Hostess are betting to revive those brands with the proper investment.
Sugar Rush: Ferrero and Hostess Take Up Final Bid
On Thursday, Ferrero and Hostess put up their final proposal for the cookie and snacks brands. Murray and Mother’s cookies as well as Stretch Island fruit snacks are also up for sale. While other bidders are still in disagreement, as per the people, the two companies are leading the bid. With more than a week away to seal the deal.
Hostess’ $1.2 billion market capitalization is thinking of using the Reverse Morris Trust to attain the Keebler cookie business. The Reverse Morris Trust, also known as the RMT, is a rare deal structure allowing two similarly sized companies for a tax-efficient combination.
The discussions come as food businesses that include Kellogg, Kraft Heinz, and Campbell are cutting their portfolios focusing their resources on brands that their companies can save. With the stalling sales growth across the trade, food leaders are driving more targeted efforts into intercepting off upstart on-trend players like Beanitos chips and Kind Bars. Big Food brands goals no longer concentrate on a simple scale and cost efficiencies.
Steve Cahillane, Kellogg’s CEO, said in a statement last year that they need to make strategic choices about their business. He also added during his announcement about the planned divestitures that the brands have challenges in competing for funds and investments within their portfolio.
Kellogg, with $19.5 billion of market capitalization, was behind by 11% over the past year. Kellogg execs believed that they could revive brands like Pringles, Cheez-Its and Rice Krispies treats with single-serve options and innovations.
Potential Big Food products up for grabs are Maxwell House coffee and Breakstone’s cottage cheese business from Kraft Heinz that the ketchup leader is thinking of selling. Other companies that are considering divestiture are Conagra and General Mills. On the other hand, Kellogg’s rival Campbell Soup is on the verge of another cookie deal.
Campbell sold its U.S. fresh food and international business, to cut down its portfolio, which includes Arnott’s, an Australian cookie and biscuit business. The global entity with a value of around $3 billion, received its final proposals. Mondelez, the Oreo owner, is seen as a leader for the business, was advised to be cautious of facing competitors from other companies, with potential anti-trust apprehensions.
Keebler was obtained by Kellogg’s in 2001 at $4.4 billion. Part of its draw at the time was the cookie brand’s platform of “direct-store delivery,” which employees put the company’s products directly in the stores instead of shipping companies and warehouse storage. With this kind of platform, DSD provides the company freedom to control their display efficiently in the stores and groceries. However, the cookies in-store sales have fallen, which leads Kellogg to drop the DSD distribution.
The New Face of the Old Brands
Companies like Ferrero prove how new attention can bring life into the previously deserted brands. Products like snacks and sweets still appeal to today’s consumers who are always on the go. Brands just have to be able to adapt to changing lifestyles.
Nestle’s U.S. candy business was bought by Ferrero last year for $2.8 billion, as part of the efforts of the Swiss giant to redeploy on its main food and nutrition products. Ferrero stuck to its part of the deal and relaunched Butterfinger.
Founded in Italy as a Family business in 1946, Ferrero is on an acquisition spree for the past two years. Other deals like the $1 billion purchase of Ferrara Candy Company, the U.S. owner of Now & Later Candies and Red Hots. The deal gives Ferrero the infrastructure to further develop in the US market.
In the meantime, Hostess is eyeing deals in expanding its treats beyond Ho-Hos and Twinkies. Dean Metropolous, Executive Chairman, said last year that the company already looked at every snack acquisition announced that year, however, was held off by the high market value. Breakfast brands Cloverhill from Aryzta and Big Texas was bought by the Twinkies owner last year.