Kellogg Agrees to Buy Keebler Foods for $3.86 Billion

By GREG WINTEROCT. 27, 2000


The Kellogg Company, the maker of Eggo waffles and Rice Krispies cereal, announced today that it would acquire the Keebler Foods Company for $3.86 billion in cash. The deal would combine the leading breakfast cereal company in the world with the second-largest cookie and cracker maker in the United States, and unite several widely recognized marketing icons, including Tony the Tiger; Snap, Crackle and Pop; and the Keebler Elves.

With about 40 percent of its business in cereals, Kellogg has been particularly hard hit as consumers have moved away from traditional sit-down meals in favor of convenience foods like breakfast bars. Kellogg's cereal sales have declined roughly 2 percent this year, weighing on the company's earnings and testing investors' patience.

While Quaker Oats, a Kellogg rival, owns Gatorade, a dominant brand in the rapidly growing category of noncarbonated beverages, Kellogg has had little outside of its cereal business to propel it forward. Sales of its Pop-Tarts have increased about 8 percent in recent years, but the company has been unable to eke out enough momentum from its secondary products to generate the double-digit earnings growth many investors expect from food companies.

Acquiring Keebler gives Kellogg a foothold in the fast-growing snack foods category, potentially easing the company's problem of being the dominant player in a dwindling segment of the food business.

https://www.nytimes.com/2000/10/27/business/kellogg-agrees-to-buy-keebler-foods-for-3.86-billion.html