On Thursday, Kellogg Company (NYSE:K) announced that it would buy Brazilian food company Parati Group for 1.38 billion Brazilian reais (US$429 million), which is part of the plan to expand into the emerging markets.
According to Kellogg, the all-cash deal will be closed late this year, and will be neutral to adjusted earnings per share in 2016 and 2017. In 2018 and thereafter, the deal will add to earnings per share. Before the deal, the company planned to repurchase shares of $700 million to $750 million. Due to the all-cash deal, Kellogg cut its plan to buyback shares of $450 million to $550 million. The deal between Kellogg and Parati Group is the fourth acquisition of emerging market in the past two years, and is Kellogg’s largest deal in Latin America.
Kellogg will buy Ritmo Investimentos, which is the controlling shareholder of Parati Group. Parati Group currently has 3,200 employees, and revenue is expected to be around $190 million. The company holds brand including Zoo Cartoon, Hot Cracker biscuits, Parati Lamen instant noodles, Parati dried pasta, and Parati. In addition, 1,300 people of 3,200 employees serves around 60,000 customers directly. Parati focuses on small to medium high-frequency Brazilian retail stores.
“Parati Group is an excellent strategic fit for Kellogg and our business in Latin America,” said John Bryant, Kellogg’s Chief Executive, in a statement.
According to the analyst, the acquisition of Parati could help Kellogg boost emerging markets to around 15% of sales, and will also be helpful for Kellogg to expand into Latin America.