Breakfast cereal company Kellogg Co. yesterday announced a $307 million deal to acquire Worthington Foods Inc., which makes vegetarian foods.

Battle Creek, Mich.-based Kellogg will pay $24 for every share of Ohio-based Worthington, which owns the Morningstar Farms, Natural Touch, Worthington and Loma Linda brands of veggie burgers and other non-meat food products.

Wall Street's response to the news was mixed. Kellogg stock closed at $37.12 1/2 a share yesterday, down 31 1/4 cents a share from Thursday, and Worthington's shares jumped to $23.06 1/4, up $8.68 3/4 from Thursday.

Barely a week ago, Kellogg had sold its slow-moving bagel business to Aurora Foods Inc. for $275 million--a steep discount to its purchase price of $466 million.

The acquisition of Worthington will allow Kellogg to diversify into the non-meat foods segment. Kellogg's chief executive, Carlos M. Gutierrez--appointed to the job in April--said Worthington would add a "high-growth earnings stream to Kellogg's current [growth] model."

According to Kellogg, Worthington controls more than 50 percent of the meat-alternative market, which, Kellogg said, has grown at a compound annual rate of 40 percent in the past five years.

However, Worthington's $170 million in expected revenue for 1999 will not have an impact on Kellogg's $6.8 billion annual sales or earnings. "It's not a big transaction and it is not going to impact Kellogg's earnings next year," said Eric Katzman, vice president at Merrill Lynch Global Securities.

Kellogg, considered a cereal giant, has been facing slow sales in its core business. In 1998, cereal sales declined by 4.3 percent in North America and by 1.2 percent in Europe. Although sales were up 6.9 percent in Asia, the market there is still too small to make up for the shortfall in North America and Europe.

The "cold-cereal category appears to be a mature market and it is difficult to gain ground here," said Katzman. Besides, consolidation in the retail industry is squeezing manufacturer margins.

Kellogg plans to use its extensive distribution network and marketing muscle to push the Worthington brands. Kellogg has projected conservative sales growth of 17 percent a year for the new brands, although their current growth rate is more than 30 percent.

Kellogg plans to retain some of Worthington's key employees, and Dale E. Twomley, president and chief executive of Worthington--scheduled to retire soon--will stay with Kellogg for a year or so, according to Gutierrez.

The merger is expected to be completed by the end of this year.