Kellogg: Spin Off Details Shadowed By DEI Audit Discussion

The Kellogg Company reiterated preliminary details about the company’s future structure during its annual shareowner meeting today, held nearly a year after it first announced plans to divide the business into independent entities.

Kellanova – the new name for the company’s snacking, international cereal, noodles, plant-based and North American frozen breakfast businesses – will split from W.K. Kellogg, the new cereal business entity, by the end of Q4 2023. Both businesses will continue to operate from the company’s Battle Creek, Michigan and Chicago locations. Additionally, the Kellogg’s brand name will continue to be printed on all food products produced by either corporation.

However, Kellanova will be run by current Kellogg CEO Steve Cahillane, while W.K. Kellogg will see the company’s current chief legal officer, Gary Pilnick, take on the role of chief executive. The new cereal company will also develop its own ESG strategy, Cahillane noted on a call with shareholders.

Aside from mentioning what will stay the same, Cahillane shared little new information about the changes to come. The new companies will trade under their own unique ticker symbol; however, details about how shares of the current company will be allocated between the two new businesses are unclear.

“At the spin [off] date, [shareholders] will get a dividend, which in fact, will come in a share,” he explained in response to a question from shareholders. “You will have a share of the W.K. Kellogg Co. which will be proportionate based on the valuations of those two businesses and so that’s essentially the mechanics and the math and how it will work.”

Cahillane noted that the company will hold an additional investor meeting later this summer to further divulge details regarding the split, dividend rates and capital structure ahead of the formal division. He also stated that the restructuring is being executed so that both new entities can focus on innovating around their new, respective core categories.

“[The W.K. Kellogg Co team] will literally wake up each and every day focused on one thing and one thing only: how to create value for their shareholders, how to grow, develop and innovate around the most iconic cereal brands,” said Cahillane. “It will be the top priority each and every day and I, for one, have great confidence that they are going to have a great degree of success in driving that business forward.”

While the split dominated the majority of the discussion, during the proxy voting period of the call shareholder Ethan Peck presented a proposal in favor of audits for the company’s Diversity, Equity and Inclusion (DEI) policies. Peck, an associate for the National Center’s Free Enterprise Project, a conservative shareholder activism program, made a range of claims about Kellogg’s DEI efforts and the practice of DEI as a whole.

“DEI is wicked nonsense,” stated Peck on the call. “It’s overtly bigoted against men, white and straight people by wrongly assuming that they are inherently and irredeemably racist and sexist oppressors who supposed privilege needs to be hijacked and forcibly redistributed to those arbitrarily deemed diverse.”

He went on to claim that DEI efforts exploited employees and attempted to use Kellogg’s hiring, promotion, supplier selection and employee training DEI-related policies as evidence that the company is “intentionally sowing division between employees.” Peck’s proposal was defeated, with only 2% of shareholders voting in favor.