Kellogg loses $1.3 billion in value after spinoff of snacks biz
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Breaking up isn't what it used to be. Kellogg did it Monday — to a resounding raspberry from the market.
Why it matters: If most mergers destroy value, then it perhaps stands to reason that most demergers will create value. In this case, however, some $1.3 billion was vaporized in a single day's trading.
By the numbers: As of the market close on Friday, Kellogg was worth $20.4 billion. By the time trading closed on Monday, it had become two separate companies worth $19.1 billion combined.
Flashback: On June 21, 2022, the market cheered Kellogg's announcement that it intended to split into three as-yet unnamed companies — "Global Snacking Co.," "North America Cereal Co.," and "Plant Co."
- That day, Kellogg shares spiked by 10% at the open to trade at $71 each — representing a market value of $24.3 billion.
- Anyone who excitedly bought 100 shares of Kellogg in June 2022 for $71 — a $7,100 investment — would today own 125 shares in two different companies worth a total of $5,585.
Our thought bubble: Three main things happened between June 2022 and today.
- The first is the rise of Ozempic and similar drugs that reduce demand for snacks. Novo Nordisk's gain may be Kellogg's loss.
- The second is that Kellogg decided on a name for its "Global Snacking Co.," and instead of just calling it "Global Snacking Co.," which would have been an amazing name for a company, decided to call it Kellanova.
- Finally, Kellogg decided not to spin off its plant-based foods business and stopped making its fake meat, which was sold under the equally atrocious brand name of Incogmeato.
The bottom line: If you name your newco something silly like Kellanova or Kyndryl, don't be surprised if it underperforms.
