KRAFT FOODS has became the latest US company to decide to separate its businesses, announcing that it is to split its north American grocery division from its global snacks business less than 18 months after its hostile $19 billion takeover of Cadbury, the UK chocolate maker.
It is to spin off its grocery arm, which has revenues of about $16 billion and brands such as Kraft’s macaroni and cheese, Oscar Mayer meats and Philadelphia cream cheese. The faster-growing snacks business has revenues of about $32 billion, with about 42 per cent coming from developing markets, and includes Oreo biscuits, Cadbury and Trident gum.
“As we acquired Cadbury and began to put the businesses together, we continued to look at our strategic plans for the combined company and it was clear that we had very different businesses,” said chief executive Irene Rosenfeld. Credit Suisse analysts estimated that the snacks group could expand at 7 per cent a year, against a 2 per cent growth rate for the north American business. “The biggest complaint we hear about this company is that it is too big and too slow,” they wrote. “This solves it.”
Kraft stock rose more than 4 per cent to $35.70 in morning trading in New York yesterday.
Centerview Partners, Evercore Partners and Goldman Sachs advised Kraft. Billionaire Warren Buffett, Kraft’s largest shareholder with 6 per cent, welcomed the decision to split the company. He told CNBC that he had spoken to Ms Rosenfeld this week and had given his approval for the deal.
Kraft’s move, however, has raised hackles in the UK. The US group had angered many after the Cadbury takeover, when it closed a factory in Bristol with the loss of hundreds of jobs, in spite of having promised to keep the site open.
Kraft has promised to keep the remaining manufacturing plants open for at least two years and to commit investment to research activities.
Sir Roger Carr, who led the robust defence against Kraft as chairman of Cadbury, applauded the move and called for the new company to be called Cadbury. Kraft expects to complete the separation by the end of next year.
