Mars, the company behind M&M's, Skittles, and Snickers, has reached an agreement to buy Kellanova for 83.50 $ per share. The deal was financed with a combination of cash and secured debt. Mars said the deal represented a 44 % premium to Kellanova's 30-day volume-weighted price. A press release.
The acquisition is expected to close in the first half of 2025, subject to shareholder and regulatory approvals and closing conditions. Upon completion, Kellanova will become part of Mars Snacking, reporting to Mars Global President Andrew Clarke.
Kellogg's snacks and cereals division was split into Kellanova Co. and W.K. Kellogg Co. last year. Kellanova reported better-than-expected earnings for the second quarter of 2024, noting that "there has been a return to business activity." This is the second consecutive quarter of profit. Previous FoodNavigator USA Reports.
Mars has an excellent opportunity to develop an innovative snacking business that will be fit for the long-term future by acquiring Kellanova's growing portfolio of global brands. While combining our strengths, we will respect the innovation and legacy behind Kellanova's incredible snack and food brands. This way, our customers and consumers will be able to enjoy more choice and innovation. In a recent press release, Poul Weihrauch said, "We have great respect for Kellanova's historical legacy and look forward to welcoming their team."
“The Kellanova brand significantly expands our snacking platforms.”
Mars, a privately held company, released a statement outlining the strategic objectives of its acquisition. The deal would accelerate Mars' ambition to grow Mars Snacking by $2 billion over the next decade by adding Pringles and Cheez-It to the portfolio.
The year 2020 will be the first time we can expect to see a new generation of future leaders. MarchKIND Snacks is reportedly getting $5 billion to boost its healthier snacking options.
In a statement, Mars said the combined company was "well-suited" to meet consumer demand for diverse tastes and price points in fast-growing regions such as Africa and Latin America. Kellanova's R&D team and marketing department "will also share best practices for brand development." Deliver enhanced digital capabilities“We will unlock the strengths of complementary channels and enhance brand ecosystems and immersions.
This is an excellent opportunity for Kellanova Snacking and Mars Snacking to realize their potential. Kellanova shares a long history of building globally recognized brands. Kellanova's brands are an important addition to our snacking portfolio, enabling us to better meet consumer needs and grow profitable businesses. "Our complementary portfolios will unlock enhanced innovation for consumers, based on our routes to market and R&D capabilities," Clarke said in a recent press release.
Does the Kellanova acquisition herald further mergers and acquisitions?
Arun Sundaram is a senior vice president at CFRA Research, an investment research firm. He shared prepared remarks on how Mars' purchase of Kellanova could be an indication that M&A activity is returning to the CPG food and beverage space after a post-COVID slump.
This acquisition could be the largest ever for packaged foods and lead to further consolidation in the industry. We believe it represents a merger between two food giants, Mars and Kraft, both known for their innovation, brand development, and quality. [Kellanova] Sundaram said Mars has a global reach and can bring its products to new markets.
The deal is so significant that we expect it to be scrutinized by antitrust authorities, particularly in light of current food price increases. We believe the merger will ultimately proceed given the low category overlap between the two companies.
Carl Quash III, head of snacks and nutrition at Euromonitor International, also expects "an increase in merger and acquisition activity within the snack industry as competition intensifies among major players."
Quash III, FoodNavigator USA: "This megamerger accelerates Mars' goal of doubling its snacking business by 2034 and intensifies competition for global snacking leaders PepsiCo & Mondelez as it anticipates a nearly two-point gain in global snacks."
John Oh, an expert at Third Bridge Global Research, believes that confectionery and snack manufacturers will also increase their merger and acquisition activity in response to this deal.
I wouldn't be surprised if other companies in this space, such as Frito Lay (PepsiCo), consider potential acquisitions to gain a competitive advantage or as a defensive measure. The deal could also encourage confectionery companies like Mondelez and Hershey to increase their growth plans in the savory snack market.
“Mars…is struggling to cope with changes in price and demand”
Quash III said Mars' expansion into the savory and salty snack market could also help offset challenges in its portfolio. These include higher production costs and consumers seeking healthier products. The food and beverage industries are grappling with supply chain issues, which have led to rising cocoa bean costs.
Hershey, a Mars competitor, warned that cocoa prices would continue to rise in its second-quarter results. Previous FoodNavigator USA Reports.
Mars, like other chocolate and confectionery companies, has struggled to adjust its pricing and supply due to market changes caused by the cocoa shortage and the shift away from sweets by health-conscious consumers. With the promise of this acquisition, Mars will own a broader range of assets and strengthen its presence in the savory sector to complement its dominance in the sweets and confectionery sector,” said Quash III.
The CEO added that "this will benefit Mars going forward, as several of Kellanova's savory brands have already been repositioned to meet the increased demand for healthy products such as Pringles Harvest Blends or Cheez – which are made with whole grains and cheese. Mars can also better cushion itself against challenges in one area of its business, such as what we are currently seeing with chocolate."
Oh said that while the confectionery and chocolate categories face challenges due to the growing demand for healthier foods, the savory snack segment is "a little more insulated from consumption risks."
Oh said that while the Mars deal "will give it a place in the savory snack category with established brands," Mars needs to figure out how to integrate the other brands into the overall snacking strategy.
The question is whether Kellanova can continue to compete in adjacent product categories, such as frozen foods (Eggo), and especially plant-based foods (Morningstar Farms), in which the company operates. He added that the synergies Mars can find in these segments are not as apparent or obvious as they would be in the snacking segment.
English 
French