"Creating shareholder value" by doubling overhead expense

Somehow, I missed the announcement that Kellogg’s is breaking up. Originally was going to break into three companies, now two.

The current CEO has appointed himself the CEO of the snacks division, and taking the “K” ticker symbol with it, while the cereal business is left behind. Why? My take is it is all about lining the CEO’s pocket. He will be running the “high growth” product line, so the stock, and his stock based compensation, will rise faster than it would, if the company retained the cereal business. So, for the CEO’s personal benefit, in aggregate, the operations now known as Kellogg’s will be burdened with double the overhead, for no increase in the actual economic value of the company.


If that is the case, I assume the shareholders will vote against it. Why would they vote for it?

I have not found any mention of a shareholder vote. I’m sure that the vote would be for the split, because it’s all about “unlocking shareholder value” by dumping the slower growth cereal line. Everyone will be thinking “dump the cereal stock and hold the Cheez-Its”. More Welchism: financial trickery to juice the stock, and line the CEO’s pocket, with no actual increase in aggregate economic value.

fwiw, I rarely, if ever, eat Kellogg’s cereal, because it is expen$ive. I usually munch General Mills products, because they are a better value.



Because after the split the higher growth portion (snacks) will have a higher P/E multiple because of the growth. After the split shareholders will own shares in both companies, one with higher growth and the other more stable with higher dividend payout. They can then buy/sell the portion that fits their goals.

If you remember Pepsi did something similar with Yum Brands.


Yes, that is what will happen, but, in aggregate, what has been gained? More “jobs” for administrators, more overhead to pay for, as, for all the routine, not one more box of cereal nor one more box of Cheez-Its will be made.

It’s clear, the CEO, who anointed himself CEO of Cheez-Its, will make more loot. Meanwhile, the cereal division will be given a low P/E, and probably be burdened with debt, to polish up the numbers for the snax company.

J&J’s spinning off it’s consumer products operations is clear too. As expected, the court tossed their “Texas two-step” scheme to duck their talc liability, so the consumer products division will be handed the liability, and probably be set up to go BK, to put a low cap on the payout. But all that does not make one more Band-Aid.

Just more financial trickery, not growing the economy.



Choice for the shareholders.

For the management, a chance to focus time and resources on a particular goal, such as higher growth or a larger dividend.


Product liability whether things go to court or not.

Kellogg’s has been really only producing heavily processed foods. Worse than sugar and then adding sugar. Class action suit ready for diabetics. Besides fewer people now eat that way in the mornings.