Mars to Acquire Cheez-It Owner Kellanova in Nearly $30 Billion Deal

M&M’s creator, Mars, has finalized an agreement valued at nearly $30 billion to acquire Kellanova, which marks one of the food industry’s largest transactions. This strategic move allows Mars to broaden its brand portfolio to include popular salty snacks like Pringles and Cheez-It.

Kellanova emerged last year following the separation of the Kellogg Company into three distinct entities. This company boasts a roster of the former Kellogg’s most lucrative brands, such as Eggo, Town House, MorningStar Farms, and Rice Krispies Treats. With over 23,000 employees, Kellanova reported net sales exceeding $13 billion in the past year.

The acquisition will extend Mars’ presence in the salty snack category. While the company already owns brands like Combos and Uncle Ben’s, it is primarily recognized for its chocolates, candies, and pet food products. Mars is well-known for iconic treats such as M&M’s, Lifesavers, Juicy Fruit gum, and Skittles, as well as pet food brands like Pedigree and Royal Canin.

In recent years, however, the sales of some of Mars’ products, including gum, have declined as consumer snacking preferences have evolved. Acquiring Kellanova presents an opportunity for Mars to tap into areas of growth and diversify its offerings.

Neil Saunders, managing director of GlobalData, commented on the acquisition’s rationale, stating, “There is significant logic behind Mars acquiring Kellanova, not least because the deal would allow Mars to push more heavily into the savory snacks category where it has virtually no presence. Savory snacks sales are growing at a faster clip than confectionery, where Mars currently predominates.”

This deal represents the largest transaction in the sector since J.M. Smucker’s purchase of Hostess for $5.6 billion last year. It ranks as one of the most significant deals of 2024, surpassed only by ExxonMobil’s monumental $60 billion acquisition of Pioneer Natural Resources.

Andrew Clarke, global president of Mars Snacking, highlighted the strategic advantages of the acquisition, stating, “The Kellanova brands significantly expand our snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth.”

Mars Inc. announced that it plans to pay $83.50 per share in cash, with the total value of the acquisition estimated at $35.9 billion when accounting for debt.

Following the announcement, Kellanova’s stock surged by $5.50, or 7.4%, bringing its share price to $80.00 during morning trading on Wednesday. Headquartered in McLean, Virginia, Mars is recognized as one of the largest privately held companies in the United States.

The acquisition of Kellanova is projected to conclude in the first half of the forthcoming year. Once finalized, Kellanova will be integrated into Mars Snacking, although its corporate headquarters will continue to operate out of Chicago.

The third company that was created from the Kellogg split, WK Kellogg Co., retained cereal brands such as Raisin Bran, Frosted Flakes, and Froot Loops, which have faced declining sales in recent times. This company is not part of the new deal.

The merger comes at a crucial time for Kellanova, as rising prices are putting pressure on consumers and forcing many companies to hold the line on pricing. Economists suggest that consumers appear to be reverting to behaviors seen before the pandemic, when raising prices could lead to a drop in business.

Mars began its journey in 1911 when founder Frank Mars started crafting and selling butter cream candy from his home in Tacoma, Washington. By 1929, the company relocated to Chicago, where it introduced the Snickers bar the following year.

Since its inception, Mars has expanded through numerous acquisitions. In 1935, it made its entry into the pet food industry with the acquisition of a dog food brand in the UK, and later acquired Dove ice cream in 1986. Notably, in 2008, the company purchased the Wrigley chewing gum business for an impressive $23 billion.

Source: CBS News