Spinoffs are meant to unlock unrecognized value, but a plan by Kellogg Co. might be taking that strategy to new levels. Kellogg’s core business — or what’s left of it after a pair of spinoffs announced on Tuesday — could be worth more than the current value of the combined entity, according to a research firm that specializes in such transactions. The separation plan is just the latest example of large conglomerates addressing the pain of slower growth and higher interest rates that have weighed on stocks all year.
The company’s global snacking business could earn a higher valuation that’s closer to peer Mondelez International Inc. after separating from Kellogg’s North American cereal and plant-based foods units, analysts at The Edge Consulting Group wrote in a note on Tuesday. Based on Mondelez’s valuation of 3.5x enterprise value on its 2021 sales, the remaining snacks business would be worth about $40 billion — at least $10 billion above current levels. “That is a tremendous value unlock for the RemainCo, with the other two businesses literally to be received for free,” according to the note. Others on Wall Street were also positive about the company’s outlook after the announcement.