Mars — the maker of M&M, Skittles and Snickers — entered into a definitive agreement to acquire Kellanova, assuming its $6 billion in debt, for $83.50 per share in an all-cash deal, financed by a mix of available cash and new debt with secured commitments. The deal “represents a premium of approximately 44% to Kellanova’s unaffected 30-trading day volume weighted average price,” Mars shared in a press release.
The acquisition is expected to close in the first half of 2025, pending regulatory and shareholder approval and closing conditions. Upon closure, Kellanova will become part of Mars Snacking, led by Mars' Global President Andrew Clarke.
Last year, Kellogg split its snack and cereal division into two separate companies, Kellanova and WK Kellogg Co, respectively. This month, Kellanova posted better-than-expected second-quarter 2024 earnings noting “a return to full commercial activity” for two quarters in a row, FoodNavigator-USA previously reported.
“In welcoming Kellanova’s portfolio of growing global brands, we have a substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future. We will honor the heritage and innovation behind Kellanova’s incredible snacking and food brands while combining our respective strengths to deliver more choice and innovation to consumers and customers. We have tremendous respect for the storied legacy that Kellanova has built and look forward to welcoming the Kellanova team,” said Poul Weihrauch, CEO and office of the president of Mars, in a press release.
‘The Kellanova brands significantly expand our snacking platform’
In a press release, Mars, a privately held company, outlined the strategic priorities of the acquisition and how the deal will accelerate its "ambition to double Mars Snacking in the next decade" by adding two billion-dollar brands — Pringles and Cheez-It — to Mars’ portfolio.
In 2020, Mars acquired KIND Snacks for a reported $5 billion to bolster its better-for-you snacking offerings.
The combined company is "well-suited to meet consumer demands for a variety of tastes and price points in fast-growing geographies, including Africa and Latin America," Mars said in a press release. Additionally, Kellanova's R&D and marketing team will "business to share best practices in brand building, deliver enhanced digital capabilities, unlock complementary channel strengths and advance brand ecosystems and immersions," the company added.
“This is an exciting opportunity to create a broader, global snacking business, allowing Kellanova and Mars Snacking to both achieve their full potential. Kellanova and Mars share long histories of building globally recognized and beloved brands. The Kellanova brands significantly expand our snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth. Our complementary portfolios, routes-to-market and R&D capabilities will unleash enhanced consumer-centric innovation to shape the future of responsible snacking,” Clarke shared in a press release.
Is the Kellanova deal a sign of more M&A to come?
Mars' acquisition of Kellanova might be a sign that M&A activity is returning to the food and beverage CPG space, following a post-COVID slump, Arun Sundaram, senior VP at investment research company CFRA Research shared in prepared remarks.
“This acquisition would be one of the largest deals ever in the packaged foods space and one that could spark more consolidation among food companies. In our view, this is a good marriage between two high-caliber food companies, as Mars is known for its innovation and brand building, while [Kellanova] has the global reach to bring more Mars products to more markets,” Sundaram said.
He added, “We expect anti-trust scrutiny given the sheer size of the deal against the current backdrop of rising food prices. However, we think the deal will ultimately go through, given the limited 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 heats up among the leading players.”
"This megamerger will accelerate Mars' goal to double its snacking business by 2034 while also intensifying competition for global snack leaders PepsiCo and Mondelez due to its anticipated near two percentage points gain of global snacks," Quash III told FoodNavigator-USA.
John Oh, an analyst at global research firm Third Bridge, also sees confection and snack leaders stepping up their M&A activity in response to the deal.
“It would not be too surprising to see other players in the space, such as Frito-Lay (PepsiCo), explore potential acquisitions as a sort of competitive or defensive move. This deal could also perhaps influence other confectionery players such as Mondelēz or Hershey to accelerate their growth plans in salty snacking,” he added.
‘Mars … is having a tough time with pricing and demand shifts’
As it expands into the salty and savory snack space, Mars is also potentially offsetting challenges to its portfolio, which is seeing higher input costs and consumers seeking better-for-you products, Quash III said. This year, chocolate prices have risen due to increasing cocoa bean prices as the food and beverage industry grapples with supply-chain issues.
In its second-quarter earnings, Mars competitor Hershey warned about “sustained high prices” of cocoa, as FoodNavigator-USA previously reported.
“Mars, like the rest of the chocolate and confectionery industry, is having a tough time with pricing and demand shifts due to the cocoa crisis and health-conscious moves away from too many sweets. With the promise of this acquisition, Mars will hold a wider range of assets and build a stronger savory presence to complement its dominance in sweets/confectionery,” Quash III said.
He added, “This will also benefit Mars' future demand with several of Kellanova's savory brands already repositioning to deliver on increased health demands such as the launch of Pringle's Harvest Blends and Cheez — these are made with whole grains and real cheese. Mars will also be able to better buffer the challenges faced in any one part of its business — like we are seeing with chocolate now.”
Though the chocolate and confection categories are facing challenges due to the demand for healthier products, “the savory snacking category is a little bit more insulated to consumption risks,” Oh said.
While the deal “brings an already established foothold with great brands in the salty snacking category,” Mars will need to figure out how to incorporate the non-snack brands into its overall snacking push, Oh explained.
“The question will be with some of the adjacent categories Kellanova operates in such as frozen foods (Eggo) and in particular plant-based meats (Morningstar Farms), where the category continues to face pressures. The synergies for Mars in these segments may not be as obvious or easy to find compared to the snacking side,” he added.
