The board of directors at
Kraft Foods Inc.
) has approved the spin-off of the company's North American grocery
operations. The board also declared a pro rata distribution of
shares of Kraft Foods Group, Inc. to holders of Kraft Foods Inc.
The spin-off process will be completed on October 1, 2012.
Following the process, North American grocery operations will be
called Kraft Foods Group, Inc.
Kraft Foods Group, which includes North American grocery
operations, consists of the current US Beverages, Cheese,
Convenient Meals and Grocery segments and the non-snack categories
in Canada and Food Service.
The company will focus on achieving reasonable revenue, optimizing
cost structure, maintaining robust margins and liquidity going
Following the divestiture, the global snacks operations would
include Kraft Foods Europe and Developing Markets units as well as
the North American snacks and confectionery businesses. The company
will market popular brands like Cadbury, Jacobs, LU, Milka,
Nabisco, Oreo, Tang and Trident.
The spin-off will allow Kraft Foods Inc. to grow its position in
the fast growing snacks business, particularly in emerging markets.
The company intends to focus on increasing its revenue and
earnings, optimizing its cost and improving its margin through
better volume and product mix.
The nature of the two businesses is vastly different. The spin-off
will enable the businesses to focus on their respective operational
In a separate development, on August 14, 2012, the board declared a
cash dividend of $0.29 per share on the company's common stock. The
dividend is payable on October 15, 2012 to stockholders of record
as of September 19, 2012.
We currently have a Neutral recommendation on Kraft Foods Inc.
The stock carries a Zacks #3 Rank (a short-term Hold rating).
KRAFT FOODS INC (KFT): Free Stock Analysis
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Overall, we like Kraft Foods' diverse brand portfolio, focus on
innovation, strong momentum of power brands and significant
exposure to the fast growing emerging markets. We consider the
spin-off of its North American business a positive, since it will
enable Kraft to focus on its distinct strategic priorities and
allocate resources optimally.