Mars, a family-owned candy conglomerate, has agreed to acquire Kellanova, the maker of Cheez-It, in a transaction valued at nearly $36 billion. This merger unites a plethora of consumer food brands, ranging from M&M’s and Snickers to Pringles and Pop-Tarts, marking one of the largest deals in the industry. Mars announced on Wednesday that it will offer $83.50 per share for Kellanova, a price that reflects a 33 percent premium over Kellanova's closing price on August 2, prior to initial reports by Reuters about Mars' interest in the Pringles producer.
The U.S. packaged food sector is experiencing a surge in deal activity as companies aim to expand their scale to mitigate the effects of consumers' shift towards cheaper private label brands amid rising prices. Investors are also concerned about potential sales declines due to the increasing use of weight-loss medications like Ozempic and Wegovy, which could reduce appetite and induce feelings of fullness. Mars plans to strengthen its snacking division, invest locally, and introduce healthier options through this acquisition, viewing the snacking category as both attractive and durable. According to GlobalData, Mars currently holds a 4.54 percent share of the U.S. snacking market, while Kellanova holds approximately 3.9 percent, trailing far behind market leader PepsiCo.
The acquisition, significantly larger than Mars' $23 billion acquisition of Wrigley in 2008, is not anticipated to encounter substantial antitrust challenges due to the minimal overlap in the product offerings of the two companies, as legal experts have informed Reuters. Upon completion in the first half of 2025, Kellanova will integrate into Mars Snacking, headed by Global President Andrew Clarke, and will be headquartered in Chicago. Kellanova's shares increased by about 7.4 percent to $80 in early trading, valuing the company at $28.58 billion on an equity basis, according to Reuters calculations.
Kellanova, which separated from WK Kellogg last October, focuses on salty snacks and sells cereal outside of North America. WK Kellogg retained the North American cereal business of the original Kellogg company. Arun Sundaram from CFRA Research commented, "It's evident why Kellanova spun off its sluggish domestic cereal business last year. We might see more packaged food companies divesting or spinning off slower-growing segments to attract new buyers." In May, Reuters reported that investment firm TOMS Capital Investment Management had acquired a significant stake in Kellanova and was in discussions with the company to enhance shareholder returns.
Under the terms of the agreement, Mars is obligated to pay a $1.25 billion termination fee if regulatory approvals are not obtained, while Kellanova must pay $800 million to Mars if the board recommendation changes. Mars plans to finance the deal through a combination of cash and new debt, with Citi serving as its financial advisor and Goldman Sachs advising Kellanova.
