Kellogg Co. Gains Access to Latin America with Large Acquisition
In attempts at expansion, The Kellogg Co. (K) might just have won access to Latin America. Kellogg has agreed to acquire Ritmos Investimentos for $429 million cash.
Ritmo Investimentos is a controlling shareholder of Parati S/A, Afical Ltda and Pádua Ltda (Parati Group), a Brazilian food group.
The Kellogg Co, maker of famous long-standing cereals such as Frosted Flakes and Raisin Bran, said that it will have to cut back on share repurchases in 2016 to $450 million-$550 million from $700 million-750 million to maintain financial flexibility after this major purchase.
The Parati Group operates five distribution centers and two production facilities, employing 3,200 people. The company’s salesforce includes approximately 1,300 people serving about 60,000 customers directly, according to Reuters.
The Parati Group net sales are expected to be approximately $190 million. Kellogg said it expects the acquisition to be accretive on both comparable and reported earnings per share in 2018 and after.
The Kellogg Co. and Latin America
The large sum deal is Kellogg’s fourth attempt at accessing emerging markets in the last two years and its biggest in Latin America.
“The combination of Parati’s portfolio and sales and distribution capabilities with Kellogg’s global resources — including innovation expertise, extensive shopper insights and customer marketing strength — provides tremendous opportunity,” said Maria Fernanda Mejia, president of Kellogg Latin America. “Bringing our companies together enables us to expand our footprint in a rapidly growing market.”
Parati Group, the maker of Parati, Pádua, Minueto, Zoo Cartoon and Hot Cracker biscuits, has five distribution centers and two production facilities in Brazil, Kellogg said.
“Parati Group is an excellent strategic fit for Kellogg and our business in Latin America,” Kellogg Chief Executive John Bryant said in a statement.
The deal is expected to be neutral to adjusted earnings per share in the first two years after close and add to earnings in 2018, Kellogg said.
Source: ABASTO
