Kellogg to buy RXBAR protein bar maker for $600 million

FILE PHOTO - Kellogg's Corn Flakes cereal is pictured at a Ralphs grocery store in Pasadena, California August 3, 2015. REUTERS/Mario Anzuoni/File Photo

(Reuters) - Kellogg Co K.N said on Friday it would buy the owner of RXBAR protein bars for $600 million as new CEO Steve Cahillane expands the world's largest cereal maker's portfolio of healthy snacks.

The move comes at a time when its cereal unit, which makes Froot Loops and Special K, is facing poor demand in the United States over the past five years as consumers move away from packaged and sugary foods and instead opt for organic products.

Chicago Bar Co, a startup that makes protein bars without added sugar, gluten, soy or dairy sells the product through fitness chains, national retailers and online.

“Adding a pioneer in clean-label, high-protein snacking to our portfolio bolsters our ... wholesome snacks offering,” Kellogg CEO Steve Cahillane said in a statement.

Kellogg’s rivals are also investing heavily in the healthy-snacking business. ConAgra bought Boomchickapop popcorn owner Angie’s Artisan Treats last month and Hershey added meat-based protein bars after it acquired Krave Foods in 2015.

Kellogg said Chicago Bar Co will continue to operate independently after the deal and expects the unit to post net sales of about $120 million in 2017.

Kellogg has been responding to consumer changes by launching healthier versions of its mainstay brands such as All-Bran and has acquired companies such as Brazil’s Parati Group to diversify its business outside the United States.

Kellogg said it will pay about $400 million net of tax benefits for Chicago Bar.

Reporting by Uday Sampath and Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur