Kellogg Company (K) recently announced that it will acquire majority stake in Egyptian packaged biscuits company, Bisco Misr, upon completion of its tender offer.
Kellogg expects to acquire 85.93% stake in Bisco Misr based on the results of the tender offer.
Cairo-based Bisco Misr is known for its Minto-brand candies and Bisco Wafers cookies. Kellogg stated that the final bid offer was 89.86 Egyptian pounds a share. The final transfer of the shares is expected to be completed by Jan 18.
The deal is part of the company’s efforts to expand its presence in international markets.
Kellogg is slowly building its business in international markets, especially the emerging markets of Asia, Central and Eastern Europe, Middle East and the African regions.
This has allowed it to overcome the saturation in the U.S. cereal market and challenging macroeconomic conditions in the developed European markets. In particular, management targets the well-performing countries like India, South Africa and Brazil for growth. Management is also increasing production capacity in emerging markets like Thailand, India, Malaysia and Poland to meet international demand.
The Pringles acquisition has also opened up growth opportunities in these fast-growing nations. Kellogg acquired the Pringles snack brand from The Procter & Gamble Company (PG) in Jun 2012. Pringles has more than doubled Kellogg’s international snacks business and tripled its size in certain key emerging markets. Pringles is now the second-largest brand at Kellogg.
Pringles has performed well since the closure of the acquisition. Since then, sales and profits in the Pringles business have exceeded management’s expectations in every quarter.
Stocks to Consider
Kellogg carries a Zacks Rank #3 (Hold). Better-ranked food stocks include Pinnacle Foods Inc. (PF) and SUPERVALU Inc. (SVU). While SUPERVALU carries a Zacks Rank #1 (Strong Buy), Pinnacle Foods has a Zacks Rank #2 (Buy).
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