Kellogg to Buy Keebler Foods for $3.6 Billion

Kellogg Co. agreed to buy Keebler Foods Co. for $3.6 billion, or $42 a share, adding the faster-growing cookie and cracker categories to its sluggish breakfast-cereal business. The cereal giant also reported a 6.5% rise in third-quarter profit and said it “may be challenged” to meet fourth-quarter earnings estimates. Keebler’s biggest shareholder, Flowers Industries Inc., put its 55% stake up for sale in July. Keebler, whose products include Cheeze-It crackers, had sales of $2.67 billion last year. Its sales have increased about 5% a year, more than the 1% average in the food industry. Kellogg has lost more than half its market value in the last 2 1/2 years. In the latest quarter, the company said operating earnings rose 6.5% to $181.9 million, or 45 cents a share, matching expectations, as sales declined 1.2% to $1.85 billion. Kellogg said increased competition, higher energy prices and interest rates could make it tough to meet the 37-cent estimate for the fourth quarter. Shares of Battle Creek, Mich.-based Kellogg rose $1.56 to close at $24.31, and Elmhurst, Ill.-based Keebler rose $1.06 to close at $40.44, both on the New York Stock Exchange. Thomasville, Ga.-based Flowers fell $2.56 to close at $16.25, also on the NYSE.