Mars Inc., the family-owned packaged food giant known for its popular candy brands like M&M’s and Snickers, is reportedly considering a potential acquisition of Kellanova, a company that produces snacks such as Cheez-It and Pringles. This move, if materialized, would mark one of the largest deals in the packaged food sector, with Kellanova’s market value estimated at around USD 27 billion, including debt. The acquisition would not only expand Mars‘ portfolio but also test the regulatory environment’s willingness to allow consolidation in the industry.
Kellanova, which split from WK Kellogg Co last October, has seen its stock price rise by approximately 20% since the separation. Despite this increase, the company’s shares are still trading at a discount compared to some of its competitors like Hershey and Mondelez International, making it an attractive target for acquisition. While Mars is currently exploring the possibility of acquiring Kellanova, there is no certainty that a deal will be reached. Other potential suitors may also express interest in Kellanova, and the outcome remains uncertain at this stage.
The packaged food sector has witnessed significant deal activity as companies seek to achieve scale and navigate challenges such as price inflation and changing consumer preferences. Last year, J.M. Smucker acquired Twinkies maker Hostess Brands for USD 5.6 billion, highlighting the trend of consolidation in the industry. However, regulatory scrutiny has increased in recent years, with antitrust authorities expressing concerns about potential mergers leading to higher prices and reduced competition.
Food prices have been on the rise, outpacing other consumer goods and services, according to data from the U.S. Department of Agriculture. This trend has prompted regulators to closely monitor mergers and acquisitions in the food industry to protect consumers‘ interests. Recent legal actions, such as the FTC and the state of Colorado suing to block Kroger’s proposed acquisition of Albertsons, underscore the regulatory challenges that companies face when pursuing large-scale deals.
For Mars, a potential acquisition of Kellanova would represent a significant strategic move, diversifying its business and expanding its presence in the snacks market. The company, owned by the descendants of founder Frank C. Mars, generates substantial annual sales and operates across three divisions: Mars Petcare, Mars Snacking, and Mars Food & Nutrition. Acquiring Kellanova would be the largest deal in Mars‘ history, surpassing its previous acquisition of veterinary hospital operator VCA in 2017.
Kellanova, with operations in 21 countries and a global market reach, offers a diverse portfolio of products, including snacks, frozen breakfast foods, and international cereals. The company’s separation from WK Kellogg Co last year resulted in Kellanova retaining brands like Pop-Tarts and Rice Krispies Treats, while WK Kellogg retained the North American cereal business under a licensing agreement. This restructuring has positioned Kellanova as an attractive target for potential acquirers looking to expand their product offerings and market presence.
In conclusion, the potential acquisition of Kellanova by Mars represents a significant development in the packaged food sector. As companies continue to seek growth opportunities and navigate regulatory challenges, strategic mergers and acquisitions play a crucial role in shaping the industry’s landscape. The outcome of Mars‘ exploration of a deal with Kellanova remains uncertain, but the potential implications for both companies and the broader market are substantial.