Kraft (KFT) Buckles To Peltz Pressure

Kraft (KFT) is in the late stages of a deal to sell its Post cereal division to private label cereal company Ralcorp for $2.8 billion. The unit was considered a poor performer at Kraft. Perhaps its sales is the sacrifice that the company’s management must make to keep activist Nelson Peltz, who has a piece of the company, happy. Peltz does not think much of the executives running the company and wants them to up the value of the shares though a higher dividend of buy-backs. Selling a few units could finance such moves.

Of course, the sale of Post assumes that the cereal business is a bad one, at least for shareholders. Over the last five years, shares in Kellogg (K) are up about 70%. And, the company pays a 2.4% dividend. Peltz might not be happy with that either. Some people just can’t be satisfied.

Douglas A. McIntyre