Mars is acquiring Cheez-It maker Kellanova for $36 billion, uniting brands like M&M’s, Snickers, Pringles, and Pop-Tarts.
Mars will pay $83.50 per Kellanova share, a 33% premium to its August 2 closing price, following deal rumors.
The deal bets on consumers sticking with branded snacks as packaged food companies face stalled growth after price hikes.
Mars CEO Poul Weihrauch told Reuters the combined company plans to maintain prices and not pass deal costs to consumers.
“We are a big and stronger company,” Weihrauch said. “We hope to be able to absorb more costs in our structure and help alleviate the issues we have in an inflationary environment.”
U.S. food prices rose 25% from 2019-2023, outpacing housing and medical costs, but inflation is now moderating.
U.S. and European consumers are increasingly seeking cheaper alternatives, often switching from brands to private label goods.
Kellanova’s market share for cereals, like Smacks and Frosties, faces private label competition in Europe, said CEO Steve Cahillane.
The U.S. packaged food sector sees strong dealmaking as companies scale to counter inflation-driven shifts toward 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 fear declining sales as drugs like Ozempic and Wegovy, curbing appetite and promoting fullness, gain popularity.
Weihrauch stated that half of the company’s portfolio will include “wholesome” snacks like low-calorie Special K and Kind bars.
Unlike Nestle, Mars currently has no plans to develop new products for users of weight-loss drugs, Weihrauch said.
Mars plans to enhance its snacking division, invest locally, and offer healthier options, citing the category as attractive and durable.
According to GlobalData, the company holds 4.54% of the U.S. snacking market, while Kellanova has 3.9%, trailing PepsiCo.
Kellanova sells noodles in Africa; however, the business faces challenges due to the continent’s economic struggles.
Cahillane noted that Kellanova’s African network benefits Mars’ candy, while Mars’ China presence offers Pringles a huge opportunity.
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