Mondelez To Spinoff Coffee Business

Shares of Mondelez International MDLZ have been moving higher after the company announced strong earnings and plans to spin off its coffee business.

Mondelez and D.E Master Blenders will be combining their coffee businesses to form a company with annual revenue greater than $7 billion. The new company will be called Jacobs Douwe Egberts and will be based in the Netherlands. Costs savings is expected to total $1.5 billion by 2018.

Mondelez will receive $5 billion in cash and 49 percent stake of the new company. Mondelez's coffee business generated $3.9 billion of revenue last year, while D.E Master Blenders saw revenue of $3.4 billion.

Related: CBS Earnings Preview: Falling Expectations?

D.E Master Blenders CEO Pierre Laubies commented, “Jacobs Douwe Egberts will leverage the rich histories of both companies, combining our complementary geographic footprints, portfolios of iconic brands and innovative technologies to offer more people around the world more access to high-quality coffee and allowing the company to capitalize on the significant growth opportunities in a highly attractive market.”

Mondelez also announced better-than-expected earnings; EPS for the quarter was $0.39 while analysts expected $0.35. Revenue was inline at 8.64 billion versus 8.74 billion for the same quarter last year.

Shares are up 7.45 percent at $37.85 in Wednesday morning trading.