One of the largest food industry mega-deals in nearly a decade was unveiled as snack giant Mars announced a deal to purchase food maker Kellanova for nearly $30 billion. This marks one of the biggest M&A deals this year, second to Capital One Financial’s agreement to purchase Discover Financial Services for $35 billion in February.
Family-owned Mars agreed to pay $83.50 per share in cash for all outstanding equity of Kellanova, representing a total enterprise value of $35.9 billion.
“All of Kellanova’s brands, assets and operations, including its snacking brands, portfolio of international cereal and noodles, North American plant-based foods and frozen breakfast are included in the transaction,” Mars noted in a press release, adding it “intends to fully finance the acquisition through a combination of cash-on-hand and new debt, for which commitments have been secured.”
Late last year, WK Kellogg Co. spun off Kellanova, the company behind Pringles, Cheez-It, Pop-Tarts, Eggo, MorningStar Farms, and other brands that include cereals and noodles. Kellanova has been outperforming many of its peers, raising its full-year guidance as new products and marketing efforts boosted sales in the second quarter.
Buying Kellanova will allow Mars, known for its chocolate-heavy portfolio, including brands such as Dove Chocolate, M&Ms, Life Savers, Skittles, Starburst, Twix, Orbit, and Milky Way, to expand into the chips and crackers aisles at grocery stores. In other words, Mars will take a more significant market share of the snacking pie as consumers eat fewer sit-down meals and graze on junk food throughout the day.
“In welcoming Kellanova’s portfolio of growing global brands, we have a substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future,” Mars Chief Executive Poul Weihrauch wrote in a statement.
Bloomberg Intelligence analyst Jennifer Bartashus said the deal is the “largest packaged-food deal in nearly a decade and could spur more M&A in the sector.”
Shares of Kellanova were higher at the start of the cash session, up above 7.5% to the $80 handle.
“We are excited for Kellanova’s next chapter as part of Mars, which will bring together both companies’ world-class talent and capabilities and our shared commitment to helping our communities thrive,” said Kellanova CEO Steve Cahillane.
Jefferies analyst Rob Dickerson told clients, “Mars enhances its global snacking business, possibly raising competitive levels for other large food players.”
If the deal fails to secure regulatory approval, Mars must pay Kellanova a termination fee of $1.25 billion.
This mega deal in the junk food space suggests these companies aren’t afraid of GLP-1s.
Tyler Durden
Wed, 08/14/2024 – 11:30
