Family-owned candy giant Mars is buying Cheez-It maker Kellanova (K.N), opens new tab in a nearly $36 billion deal, bringing together brands from M&M’s and Snickers to Pringles and Pop-Tarts in the year’s biggest deal to date.
Mars said on Wednesday it will pay $83.50 per share for Kellanova (K.N), opens new tab, representing about a 33% premium to its closing price on Aug. 2 before Reuters first reported that Mars was exploring a deal for the maker of frozen breakfast foods, such as Morningstar Farms and Eggo.
Consumers in the United States and Europe – major markets for both companies – have been looking for cheaper alternatives or ditching brands for cheaper private label goods.
Kellanova has seen private label encroach on its market share for cereal in Europe and other areas, said CEO Steve Cahillane. The company sells sweet cereals such as Smacks, Frosties and Coco Pops in Europe, according to securities filings.
The U.S. packaged food sector is seeing robust dealmaking as companies seek scale to weather the impact of inflation-weary consumers cutting back and shifting their purchases to private label brands.
“We think an environment more conducive to deal-making could also encourage some of the large-cap packaged food names within the industry to shift their focus away from portfolio cleanup and divestiture efforts and towards a more offensive, acquisition-led posture with a focus on growth,” Barclays analysts wrote in a note on Wednesday.
Investors are also worried about a decline in sales from the greater adoption of drugs such as Ozempic and Wegovy for weight loss, which curb appetites and lead to feelings of fullness.
Weihrauch said half of the company’s portfolio will be “wholesome” snacks such as low-calorie Special K, Kind bars and Nutri-grain.
Unlike competitor Nestle (NESN.S), opens new tab, Mars has no plans currently to develop new products specifically for people using the weight-loss drugs, Weihrauch said.
Mars said it plans bolster its snacking division, invest locally and introduce more healthy options through the deal, as the category is “attractive and durable.”
The company has a 4.54% share of the U.S. snacking market, while Kellanova holds about 3.9%, according to data from GlobalData, well behind market leader PepsiCo (PEP.O), opens new tab.
Kellanova sells noodles in Africa, though the business has faced hurdles due to the continent’s economic struggles.
Cahillane said Kellanova’s distribution network in Africa offers Mars an opportunity to take its candy to the continent. Mars’ presence in China offers an “enormous” opportunity for Pringles, Cahillane said.
MARS’ BIGGEST-EVER BET
The acquisition, which dwarfs Mars’ $23-billion takeover of Wrigley in 2008 and is one of the biggest deals ever in the packaged foods industry, is not expected to face too many antitrust roadblocks due to the limited overlap in the offerings of the two companies, legal experts had told Reuters.
After the completion of the deal in the first half of 2025, Kellanova will become a part of Mars Snacking, led by Global President Andrew Clarke, the companies said. It will be based in Chicago. Cahillane, a veteran of the packaged food and drinks industry who previously held positions at Coca-Cola (KO.N), opens new tab, said he would be leaving the combined company when the deal closes.
In a regulatory filing, Kellanova said the closing date for the deal could be extended by up to 12 months, if the companies do not receive the necessary regulatory approvals by August 2025.
Shares of Kellanova rose about 8% to $80.25 in early trade. Excluding debt, the deal values Kellanova at $28.58 billion, based on its outstanding share count, according to Reuters calculations.
Kellanova, which split from WK Kellogg (KLG.N), opens new tab last October, is rooted in a salty snacks business and sells cereal outside of North America. WK Kellogg was left with the North American cereal business of Kellogg, the original parent company.
Since the separation from WK Kellogg, Kellanova’s shares have traded at a discount to peers such as Hershey (HSY.N), opens new tab and Mondelez International (MDLZ.O), opens new tab, which made the company an acquisition target.