Kellogg agrees to acquire Ritmo Investimentos for $429M in cash
Kellogg announced it has entered into an agreement to acquire Ritmo Investimentos, controlling shareholder of Parati S/A, Afical Ltda and Padua Ltda, a Brazilian food group. The acquisition, the company's largest in Latin America, furthers two of Kellogg's strategic priorities -- becoming a global snacking powerhouse and expanding its presence in emerging markets. Parati Group Net Sales are expected to be approximately $190M at current exchange rates. The acquisition by Kellogg, through its subsidiary Pringles Servicos e Comercio de Alimentos Ltda, is subject to customary closing conditions and is expected to close in late 2016. The purchase price is about $429M at current exchange rates, and it will be an all-cash transaction. To preserve financial flexibility, Kellogg intends to reduce its expected share repurchases in 2016 to $450M-$550M, versus previous guidance of $700M-$750M. The profitability of this business, along with expected revenue and cost synergies, should create financial value for shareowners relatively quickly, even accounting for an initially reduced level of share repurchases. In 2016 and 2017, it is expected to be neutral to Comparable-basis EPS, depending on exchange rates, with only a slight impact on Reported EPS because of one-time costs of (1c) per-share in both years. The acquisition is expected to be accretive on both Comparable and Reported EPS in 2018 and thereafter.