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Kellogg Co., looking abroad for growth in the face of a moribund U.S. cereal business, agreed to buy Brazil's Parati Group for about $430 million, acquiring a maker of biscuits, pasta and powdered beverages.
The all-cash acquisition is expected to be completed late this year, Battle Creek, Mich.-based Kellogg said in a statement Thursday. To preserve financial flexibility in the wake of the deal, Kellogg is reducing its 2016 share buyback program to a range that tops out at $550 million, down from a previous range of as much as $750 million.
The deal marks Kellogg's largest purchase in Latin America and the company's fourth acquisition in emerging markets during the past two years.
The overseas expansion comes as the maker of Froot Loops and Special K is mired in a cereal slump, with many Americans turning away from the one-time breakfast favorite. Kellogg, the largest U.S. cereal maker, has expanded its snack business since acquiring the Pringles brand in 2012, with that unit accounting for roughly 50 percent of sales last year.
The company is paying 1.38 billion reais for the Brazilian business. Parati's products include Hot Cracker biscuits, Trink powdered beverages and Parati dried pasta.
Brazil has been going through its deepest recession on record. The real has weakened against the U.S. currency each of the past five years, so Kellogg is paying a lower price in dollars than it would have previously. Finance Minister Henrique Meirelles said on Monday that Brazilians will start to see the benefits of an economic recovery next year.
Kellogg's shares fell less than 1 percent to $76.07 as of 9:30 a.m. in New York on Thursday. They had climbed 5.8 percent this year, compared with 4.7 percent gain for the Standard & Poor's 500 Index.
The addition of Parati should help Kellogg expand its business in Latin America, boosting emerging markets to roughly 15 percent of the company's sales, said Chris Growe, an analyst at Stifel Financial Corp.
Kellogg also bought a 50 percent stake in Nigerian food distributor Multipro last year for $450 million. And it acquired Mass Food Group, Egypt's top cereal company.
"In addition to its recent transactions in Egypt and Africa, this marks a concerted effort on the part of the company to build its emerging markets presence," Growe said.