Mars, the confectionery, food and pet-care giant, has reached an agreement to acquire Pringles and Pop-Tarts maker Kellanova for a total consideration of $35.9 billion (€32.6 billion), marking one of the largest deals of the year.
The US conglomerate, known for sugary snacks such as M&M’s, Snickers and Skittles, agreed to pay $83.50 a share for Kellanova in an all-cash transaction, and will also take on more than $6 billion in net debt.
The offer by the privately held company represents a premium of more than 69 per cent more than the level at which Kellanova’s shares was trading just a few months ago.
The price Mars is offering is unusually high in the consumer sector, especially for a company making products that have fallen out of favour with health-conscious customers. The deal comes as consumers have recently curtailed spending following years of inflation that pushed prices for many staples as much as a third above pre-pandemic levels.
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However, Kellanova has so far managed to navigate the consumer slowdown. It recently raised its full-year sales forecasts after exceeding expectations with its latest earnings.
Poul Weihrauch, Mars chief executive, said that acquiring Kellanova would bring categories including salty snacks, crackers and cereals into his company’s portfolio. Kellanova also has a strong presence in regions including Africa and Latin America, expanding Mars’s reach.
“This is really bringing together two iconic businesses that are very complementary when it comes to our geographical footprint, when it comes to the categories we operate in and the brands we have,” Mr Weihrauch said in an interview.
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Kellanova, which also makes Cheez-It, Rice Krispies Treats and Eggo waffles, was created in 2023 after Kellogg separated its breakfast cereals and snacks businesses. The division under Mars will be led by Andrew Clarke, global president of Mars snacking.
One of the world’s largest family-owned businesses, Mars boasts annual sales exceeding $50 billion and a workforce of more than 150,000 employees. Kellanova’s revenues were $13 billion in 2023.
Mr Weihrauch said Mars’s 11-member board unanimously backed the deal, which the company intends to finance through a combination of cash on hand and new debt it had already secured.
The deal will probably face significant antitrust hurdles, as competition watchdogs appointed by US president Joe Biden’s administration have been aggressively challenging big mergers and acquisitions. Mars said it hoped to complete the deal within the first half of 2025.
Mr Weihrauch said he did not anticipate major regulatory scrutiny because the Mars and Kellanova businesses were complementary. “We really don’t sell the same products. They are even in different aisles in the supermarket,” he said.
Dealmaking has slowed sharply over the past few years, although it has started picking up in recent months. If the Mars acquisition of Kellanova is approved, it is likely to usher in a new wave of deals for the sector. – Copyright The Financial Times Limited 2024
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