Kraft Foods Inc. announced it has agreed to sell its fruit snacks operation to the Kellogg Company for approximately $30 million. The fruit snacks business generated net revenues of approximately $80 million in 2004.

"This sale is part of our key strategy of transforming our portfolio," said Dave Johnson, Kraft's president, North America Commercial. "Through innovations, investments, acquisitions and divestitures, we're focusing our portfolio on businesses that offer Kraft sustainable competitive advantage."

The sale includes Kraft's 31st Street manufacturing facility in Chicago, Ill. As part of the transaction, virtually all of the 400 employees there will join the Kellogg Company. "The employees at the fruit snacks facility have done an outstanding job; we wish them continued success in the future," said Johnson.

Kraft incurred an asset impairment charge of $93 million in the first quarter in recognition of the pending sale of this business. The transaction, expected to be finalized by the end of June, should help Kellogg expand its fruit snacks business. In addition, Kellogg has acquired the Nickelodeon Fruit Snacks license commensurate with this sale.

"We continue to pursue the right kind of opportunities to grow our snacks business consistent with our current strategy," said Jeff Montie, president, Kellogg North America. "We entered the fruit snacks business in 2003, and already, Kellogg has become the second largest player in the category. This transaction positions us for even greater growth in this part of our business."

The plant to be acquired has 300,000 square feet of manufacturing, office and warehouse space, plus additional space for internal expansion and available land for external expansion.