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The new Kellogg Company features a more diversified portfolio and two of the nation's most recognized icons -- Tony the Tiger and Ernie Keebler

KELLOGG FEATURES MORE DIVERSIFIED PORTFOLIO

The payoff: Diversification, DSD, scale, and cost synergies

By completing the acquisition of Keebler Foods Company today, Kellogg Company (NYSE: K) has put in place the most critical element of its growth plan. 

"These two great companies are a winning combination for consumers, customers, and share owners," said Kellogg Chairman and Chief Executive Officer Carlos M. Gutierrez. "Thanks to five months of integration preparation by Kellogg and Keebler people, we will hit the ground running." The new Kellogg Company's growth will be propelled by:

* A more diversified portfolio, with products that rank first or second in U.S. sales in seven major food categories. Keebler is number two in the cookie and cracker segments, both growing faster than most other U.S. food categories.

* Keebler's direct store door (DSD) delivery system, which is expected to increase the growth potential of Kellogg snack foods such as Rice Krispies Treats squares and Nutri-Grain bars. 

* Greater scale in the United States, including a stronger presence in traditional supermarkets and in non-traditional channels such as convenience and gas stores, vending, foodservice, club stores, and mass merchandise stores. 

* Cost synergies, which are expected to reach $170 million annually over three years, increasing Kellogg's financial flexibility and the visibility of its earnings.

"We are building a new, stronger Kellogg Company," Gutierrez said of the expanded company, which has projected annual sales of more than $9 billion. "In addition to our cookie and cracker franchises, Kellogg is number one in the world in ready-to-eat cereal sales and number one in the United States in toaster pastries, cereal/granola/treat bars, frozen waffles, and meat alternatives." Eleven Kellogg and Keebler brands had 2000 retail sales of at least $100 million in the United States, including:

* Kellogg's cereal -- $2.5 billion, 
* Keebler cookies and crackers -- $1.3 billion, 
* Pop-Tarts toaster pastries -- $500 million, 
* Eggo waffles -- $390 million, 
* Cheez-It crackers -- $313 million, 
* Nutri-Grain cereal bars -- $230 million, 
* Rice Krispies Treats squares -- $150 million, 
* Murray cookies -- $143 million, 
* Austin snacks -- $129 million, 
* Morningstar Farms products -- $120 million, and 
* Famous Amos cookies -- $100 million.

The acquisition brings together not only Kellogg's cereals and convenience foods with Keebler's cookies and crackers, but also world-famous Kellogg icons such as Tony the Tiger and Snap! Crackle! Pop! with the popular Keebler Elves and their Hollow Tree. "This combination of equity power represents, in itself, a great opportunity for growth," Gutierrez said. Sam K. Reed, who has served as president and CEO of Keebler since 1996, today becomes vice chairman and a member of the Board of Directors of Kellogg Company. 

"Kellogg and Keebler are an uncommonly good combination," Reed said. "Both companies are better together. I've been a part of many food company integrations, and I'm convinced that Kellogg-Keebler will be the best of them all." Keebler will continue to be headquartered in Elmhurst, Illinois, operating as a part of Kellogg USA. 

Headquartered in Battle Creek, Michigan, Kellogg Company is the world's leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles, meat alternatives, pie crusts, and cones. The company's brands include Kellogg's, Keebler, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain, Rice Krispies, Special K, Murray, Austin, Morningstar Farms, Famous Amos, Carr's, Plantation, Ready Crust, and Kashi. Kellogg products are manufactured in 19 countries and marketed in more than 160 countries around the world. For more information, visit Kellogg's web site at http://www.kelloggs.com or Keebler's web site at http://www.keebler.com .

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