Mars, the company behind M&Ms, is purchasing Kellanova, the company behind Pop-Tarts and Cheez-Its, for around $30 billion, significantly increasing the number of well-known brands housed within one facility.
Last year, the Kellogg Co. divided into two businesses, forming Kellanova. Numerous of the former company’s most lucrative brands, such as Rice Krispies Treats, Town House, Pringles, Eggo, and MorningStar Farms, are sold by Kellanova. Last year, its net sales exceeded $13 billion, and it employs about 23,000 people.
Mars Inc. said on Wednesday that it will make a cash payment of $83.50 per share. The transaction’s overall estimated worth, including debt, was $35.9 billion according to the firm.
This acquisition is among the largest of 2024, second only to Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources and Capital One Financial’s $35 billion acquisition of Discover Financial Services. It is the largest in the industry since J.M. Smucker acquired Hostess for $5.6 billion last year.
It is anticipated that the deal for Mars to acquire Kellanova would finalize in the first half of 2019. When it’s finished, Kellanova will join Mars Snacking. The corporate office will still be located in Chicago.
Situated in McLean, Virginia, Mars is among the biggest privately held corporations in the United States.
Global head of Mars Snacking Andrew Clarke said in a statement, “The Kellanova brands significantly expand our snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth.”
Investment research firm CFRA analyst Arun Sundaram described the possible pairing as “a good marriage.”
According to Sundaram, “Kellanova has the global reach to bring more Mars products to more markets, while Mars is known for its innovation and brand-building.”
In light of the current high cost of food, Sundaram anticipates that the purchase will be closely examined by US antitrust authorities. However, he stated that because there is so little overlap between the two companies’ portfolios, he thinks it will eventually go through.
With the deal, Mars would have more access to the salty snack market. The company is most known for its chocolates, sweets, and pet food, but it also owns brands including Uncle Ben’s and Combos. Among its many goods are M&Ms, Lifesavers, Juicy Fruit gum, Skittles, Pedigree, and Royal Canin pet meals.
Certain goods, like gum, have seen a decline in sales in recent years due to changes in eating preferences. The agreement enables Mars to enter growth markets.
In an effort to adapt to shifting American tastes, several businesses have started expanding their selection of salty snacks. The manufacturer of candy bars, Hershey, paid $1.2 billion to acquire Amplify, the company behind Skinny Pop popcorn, in 2017. Hershey invested an additional $1.2 billion for Dot’s Homestyle Pretzels four years later.
The agreement benefits Kellanova as well, as rising costs are pressuring many businesses to set price caps and are placing pressure on customers. According to economists, a lot of consumers seem to be going back to the pre-pandemic days, when most businesses believed they couldn’t raise prices significantly without risking losing customers. In North America, Kellanova reduced its prices by 1% during the second quarter of this year.
WK Kellogg Co., the second firm created from the Kellogg split, kept cereal products including Froot Loops, Frosted Flakes, and Raisin Bran, which have had difficulty with declining sales recently. It is not a part of the agreement.
Frank Mars, the company’s founder, began producing and marketing butter cream candies out of his Tacoma, Washington, home in 1911. The Snickers bar was first introduced the following year when the company relocated to Chicago in 1929.
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