Kraft Plans to Split Into Two Companies

Maker of Oreos, Oscar Mayer and Maxwell House coffee to create a separate snacks business and grocery business.

Kraft Foods Inc. said its board of directors wants to split the company into two independent public companies.

One would be "a high-growth global snacks business with estimated revenue of approximately $32 million," the company said, and the other would be "a high-margin North American grocery business with estimated revenue of approximately $16 billion."

Northfield, Ill.-based Kraft expects to create the two companies through a tax-free spin-off of its North American grocery business to Kraft shareholders.

"As our second-quarter results once again show, our businesses are benefiting from a virtuous cycle of growth and investment, which we fully expect will continue," Chairman and CEO Irene Rosenfeld said.

"We have built two strong, but distinct, portfolios. Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realize their full potential."

Rosenfeld asserted that Kraft's snacks business "has tremendous opportunities for growth as consumer demand for snacks increases around the world," while its North American grocery business "has a remarkable set of iconic brands, industry-leading margins and the clear ability to generate significant cash flow."

Kraft said it has set the stage for the split by branching out into new geographic markets and "by building its presence in the fast-growing snacking category."

"A series of strategic acquisitions, notably of LU biscuit from Danone and of Cadbury PLC, together with the strong organic growth of its Power Brands, have made Kraft Foods the world's leading snacks company," the company said in a news release.

Through cost-cutting efforts and investments in product quality, marketing and innovation, Kraft said, "the company has delivered strong results in very challenging economic conditions."

"Having successfully executed its transformation plan, and 18 months into the Cadbury integration, the company has, in fact, built a global snacking platform and a North American grocery business that now differ in their future strategic priorities, growth profiles and operational focus," the company said.

Company management determined that creating two independent companies "is the logical next step" in Kraft's "transformation."

Kraft said it aims to launch the new company by the end of 2012.

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