Packaged food giant Kraft Foods, Inc. (KFT: Quote), which is splitting into two, announced Friday that it has received a favorable private letter ruling from the U.S. Internal Revenue Service (IRS) on the tax-free nature of its planned spin-off.
IRS confirmed the tax-free status of the planned spin-off of the company's North American grocery business and certain related reorganization. The company noted that the distribution of Kraft Foods Group, Inc. common stock generally will not be taxable to Kraft Foods, Inc. or to U.S. holders of Kraft Foods, Inc. common stock.
"This favorable tax ruling from the IRS is a significant milestone in the spin-off process. We remain firmly on-track to launch two industry-leading companies before the end of 2012," CFO Dave Brearton said in a statement.
The company noted that the separation of its North American grocery business as Kraft Foods Group, Inc. remains on-track for completion before the end of 2012.
The Northfield, Illinois-based world's second largest food company announced in early August its plan to create two independently traded public companies. The plan will create a high-growth Global Snacks company with estimated revenues of around $31 billion and a high-margin North American Grocery company with estimated revenues of around $17 billion.
Global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. Its powerful brands will include Cadbury chocolates, Jacobs coffee, LU biscuits, Milka chocolate, Nabisco cookies and crackers, Oreo biscuits, Tang drink and Trident gum.
Kraft earlier said it plans to name its global snacks business as Mondelez International Inc. after the separation. Kraft described Mondelez, which is pronounced 'mohn-dah-LEEZ,' as coined from 'Monde' the Latin word for world, and 'delez', which is a fanciful expression of delicious.
Meanwhile, the North American grocery business will comprise the current U.S. Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. Its powerful brands will include Kraft, Maxwell House Coffee, Oscar Mayer meats and Philadelphia cream cheese.
Kraft earlier revealed that the North American grocery company will become Kraft Foods Group Inc., retaining the Kraft brand for its corporate identity.
Kraft has reserved the stock symbol "MDLZ" for the global snacks company, while the stock symbol for the North American grocery business will be announced at a later date.
In Friday's regular trading session, KFT is currently trading at $38.58, up $0.23 or 0.60% on a volume of 1.72 million shares.
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by RTT Staff Writer
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