Company Halts Plans for Division, New CEO Advocates for Revival
Recently, the company that owns some of the biggest food brands in the world announced a temporary halt to its plans for a company split. The newly appointed CEO asserted that the company's current issues are solvable and within the company's power to address.
CEO's Focus on Profitable Growth
Appointed at the beginning of the year, the new CEO has declared bringing back profitable growth as his top priority. He explained this will require full concentration of all resources on the execution of the company's operational plan. As a result, the decision was made to put a temporary stop to the work related to the split of the company. This move will prevent the company from experiencing any related dis-synergies within the current year.
This announcement led to a roughly 7% drop in the company's shares in premarket trading.
Investment Plans for U.S. Business
The company also revealed plans to pour $600 million into reviving its U.S. business. The funds will be allocated towards marketing, sales, research and development, product superiority, and select pricing. This massive investment is aimed at turning around the company's current situation.
Reversal of Previous Breakup Plans
Back in September, the company had publicized plans to break up, an action that would effectively undo the $46 billion merger from ten years ago that turned the company into one of the world's largest food companies.
Initially, investors celebrated the merger, but their enthusiasm dimmed as U.S. sales of the combined company began to drop, and many of its famous brands, such as a popular meat brand and a well-known coffee brand, were written down. For approximately six years, the company has been striving to revitalize its U.S. business.
One of the key people behind the original merger expressed disappointment at the decision to break up the company. His company, a major shareholder, has since begun the process of reducing its 28% stake in the food company.
New CEO's Experience
The new CEO, whose appointment was announced in December, had previously led a well-known cereal company through its own breakup. Following that, he was the head of a separate company, a spinoff, until it was sold to a well-known candy company.
Quarterly Earnings Announcement
Along with the announcement of halting the split plans, the company also released its quarterly earnings report. The company exceeded Wall Street's earning expectations, though its revenue did not meet analysts' projections.