Kraft preps to launch two separate public companies by year's end

By Lisa Kerner

Charlotte, N.C., Feb. 21 - Kraft Foods Co. is preparing to launch "two industry-leading public companies" by the end of the year, according to a presentation made by chairman and chief executive officer Irene Rosenfeld at the Consumer Analyst Group of New York conference on Tuesday.

The North American grocery company, with about $18 billion in sales, will retain the Kraft Foods name. It is expected to deliver strong margins and substantial free cash flow with a highly competitive dividend payout by growing with its categories and capturing significant cost-savings opportunities.

Troy Vernon, North America president, will become CEO of the grocery company.

The global snacks company will have sales of about $35 billion and a new name to be announced in March. It is expected to pay a modest dividend, have strong revenue growth and feature a diverse geographical profile and "significant exposure" to high-growth, developing markets.

Organizational structures and personnel decisions for both companies are expected to be finalized mid-year.

Chief financial officer Dave Brearton said the company will incur one-time restructuring, transition and transaction costs of $1.6 billion to $1.8 billion as it prepares to separate into two companies.

Also, Kraft estimates it may incur between $400 million and $800 million of potential debt breakage and financing fees as it executes a migration of debt to the North American grocery company.

According to Brearton, both companies will be investment grade and have access to commercial paper.

Also on Tuesday, Rosenfield announced that in 2011, Kraft's net revenues grew 10.5% globally and the company delivered diluted earnings per share of $1.99.

The company's gross debt-to-underlying EBITDA ratio is 3.1 times, and the Northfield, Ill.-based food company has reduced its debt by more than $4 billion since March 2010.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.