Kellogg to acquire Keebler

Kellogg Company (Battle Creek, MI) says it has reached an agreement with Flowers Industries, Inc. to acquire Keebler Foods Co. Kellogg said it would pay Flowers $42 for each of Keebler's shares and assume Keebler's debt under the deal, which is expected to close during the first quarter of 2001.

The Kellogg-Keebler combination will create a diversified food company with $10 billion in annual sales and a collection popular brands and spokescharacters. This portfolio of Kellogg's cereals and convenience foods and Keebler's cookies and crackers will team the popular Keebler Elves and their Hollow Tree with world-famous Kellogg icons such as Tony the Tiger and Snap! Crackle! Pop!.

Kellogg expects revenue synergies to arise from enhanced distribution, marketing, and product development efforts. Kellogg chairman and CEO Carlos Gutierrez and Keebler CEO Sam Reed said they expect that benefits from the merger will include:

• Diversification of Kellogg's portfolio into faster growing categories;
  
• Substantial sales growth potential for Kellogg's convenience foods through Keebler's direct store delivery (DSD) system;
  
• New-product, cross branding, and license sharing opportunities;
  
• Greater scale in all U.S. product distribution channels, including retailing, club and mass merchandising, foodservice, and vending;
  
• Cost synergies from combining two grain-based, brand-based packaged food companies; and
  
• Greatly expanded opportunities to take advantage of Kellogg's research and development resources.

"We welcome Keebler to the Kellogg family," Gutierrez said. "Keebler is an extremely well-run company, with strong brands and a powerful DSD system. We can learn a lot from Keebler, and we believe we can strengthen both companies by bringing them together. The result should be better growth for both."

"The fit between these two companies is as natural as you can get," said Reed. "We have complementary strengths in Kellogg's traditional marketing and Keebler's in-store distribution and merchandising. Just think what our elves can do by bringing Kellogg's brands into our DSD system. We couldn't be more excited about the prospects for this uncommonly good union."

Reed, David Vermylen, currently president of Keebler brands, and other key members of the Keebler management team have agreed to become part of Kellogg Co.

Edited by Scott Hegenbart