M&M’s maker Mars is acquiring Kellanova, the company behind Cheez-Its and Pop-Tarts, for close to $30 billion to expand its snacking portfolio and global presence.
Kellanova was established last year when Kellogg Co. split into two separate entities. Based in Chicago, Kellanova sells many of Kellogg’s popular brands such as Pringles, Eggo, Town House, MorningStar Farms, and Rice Krispies Treats. With net sales exceeding $13 billion last year and a workforce of roughly 23,000 employees, Kellanova has a strong market presence.
Mars Inc. announced on Wednesday that they will pay $83.50 per share in cash, valuing the total transaction at $35.9 billion, including debt.
This deal will enhance Mars’ bargaining power and negotiation leverage with suppliers and retailers, according to consumer products specialist Randal Kenworthy from West Monroe consulting firm.
Combined, Mars and Kellanova will hold about 8% of the U.S. snack market, compared to PepsiCo’s 9% share through Frito-Lay ownership.
Kellanova’s global footprint will aid Mars in expanding internationally, while Mars’ operational efficiency improvements can benefit Kellanova’s operations, as per Kenworthy.
“Strategically, this acquisition makes perfect sense,” Kenworthy commented.
This deal marks the largest in the sector since J.M. Smucker’s acquisition of Hostess for $5.6 billion last year, and it ranks among the top deals of 2024 alongside Exxon Mobil’s $60 billion purchase of Pioneer Natural Resources and Capital One Financial’s $35 billion acquisition of Discover Financial Services.
Kellanova’s CEO, Steve Cahillane, disclosed that Mars initiated discussions a few months ago, impressed by Kellanova’s strong financial performance and outlook despite economic challenges.
The acquisition is expected to finalize in the first half of the following year, and Kellanova will integrate into Mars Snacking, headquartered in Chicago.
In terms of organizational structure, Cahillane anticipates minimal consolidation, with most Kellanova employees transitioning to Mars due to distinct manufacturing requirements for respective products.
Mars, a prominent privately-held company based in McLean, Virginia, reported $50 billion in net sales last year and employs 150,000 individuals.
“The addition of Kellanova brands significantly enhances our snacking offerings, enabling us to better serve consumer needs and drive profitable growth,” said Andrew Clarke, global president of Mars Snacking.
Arun Sundaram, an analyst at CFRA, predicts regulatory scrutiny given current high food prices but foresees approval due to minimal brand overlap between Mars and Kellanova.
While some concerns may arise about competition in healthier snack segments, Cahillane believes the impact will be minimal in the health bar category, given minor portfolio overlaps.
This acquisition broadens Mars’ presence in the salty snack category. Apart from chocolates, candies, and pet food, Mars will now have access to brands like Combos and Uncle Ben’s through the deal with Kellanova.
As consumer preferences evolve, Mars aims to capitalize on intersecting product lines like Skittles-flavored Pop-Tarts or Snickers-flavored Pringles, aligning with current industry trends.
Considering the changing consumer behaviors due to inflation, the acquisition of well-known brands is strategically timed to attract customers who prefer established brands over generic alternatives.
Following the Kellogg split, with WK Kellogg Co. retaining cereal brands, Mars secures a significant position in the market through the Kellanova acquisition.
Founded in 1911, Mars has a heritage of acquisitions, including the pet food business in 1935, Dove ice cream brand in 1986, and Wrigley chewing gum business in 2008.
Shares of Kellanova surged nearly 8% during Wednesday afternoon trading.
