NORTHFIELD, Ill. (AP) — Kraft Foods Inc. said Friday that the U.S. Internal Revenue Service indicated that it will approve the company's plan to spin off a new division in a tax-free split.
Kraft said the IRS gave the company a letter confirming the tax-free status of the planned spin-off. Kraft plans to split into two companies by the end of the year, one focusing on candy and snacks and the other focusing on grocery products.
The company said the split is still subject to several conditions, including the continuing validity of the IRS letter.
Kraft said the letter will let the company distribute shares of its new grocery company, Kraft Foods Group Inc., in stock that generally will not be taxable to the company or shareholders. Any cash paid out to compensate for fractional shares left over after the split will be taxable as a capital gain for shareholders, the company said.
Kraft's new global snacks company will be named Mondelez International Inc. The business will sell Trident gum, Cadbury chocolates and other snacks in fast-growing countries worldwide.
Kraft Foods Group will sell products such as Maxwell House coffee and Oscar Mayer meats.
Shares of Kraft rose 37 cents, or 1 percent to $38.72 in morning trading.