The U.S. packaged food industry is seeing hefty dealmaking as companies seek scale to weather the impact of inflation-weary consumers, who are reaching more and more for generic labels to save money on groceries. Aiming to gain more shelf space in the snack aisle is the M&M’s maker Mars, who is marking one of the largest CPG mergers in years with its new acquisition of Kellanova.
Mars’ $36 Billion Acquisition of Kellanova
Mars, a family-owned, Virginia-based company known for brands such as Snickers and Twix, recently announced a deal with the multinational food manufacturer (formerly known as the Kellogg Company). The candy bar giant is gearing up to purchase the global snacking company, Kellanova, in an all-cash deal valued at nearly $36 billion and will add well-known packaged foods to Mars’ portfolio like Eggo, Pop-Tarts, and Pringles.
Last fall, Kellogg Co. officially split up into two different companies, with Kellanova being one. The Chicago-based company includes many other popular consumer brands such as Cheez-Its, Rice Krispies Treats, Morningstar Farms, NutriGrain, and RXBAR, and Kellanova reported more than $13 billion in net sales in 2023.
“Mars will acquire all outstanding equity of Kellanova for $83.50 per share in cash,” the announcement stated. “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’ sweet and salty move is reminiscent of a similar strategy from competitor The Hershey Company, which added SkinnyPop with the $1.6 billion buyout of Amplify Snack Brands Inc. in 2017, followed by Dot’s Pretzels in 2021.
Impact on the Packaged Food Industry and Consumer Pricing
Banking on consumers continuing to indulge in branded snacks, the deal comes as packaged food companies face stalling growth after years of price hikes to cover soaring inflation.
Yet, according to Mars CEO Poul Weihrauch, the combined company plans to hold prices steady instead of passing costs from the deal onto 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.”
The Kellanova acquisition, which dwarfs Mars’ $23-billion takeover of Wrigley back in 2008, is one of the biggest deals ever in the packaged foods industry and is not expected to face too many antitrust roadblocks due to the limited overlap in the offerings between the two companies.
Weihrauch called the forthcoming deal “a substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future.”
“We will honor the heritage and innovation behind Kellanova’s incredible snacking and food brands while combining our respective strengths to deliver more choice and innovation to consumers and customers,” his statement continued.
Chairman, president, and CEO of Kellanova, Steve Cahillane, called the acquisition a “historic combination” of companies that is both a “cultural and strategic fit.” Cahillane further added that the “attractive purchase price” of the all-cash transaction “creates new and exciting opportunities for our employees, customers, and suppliers.” The CEO said he is “confident Mars is a natural home for the Kellanova brands and employees.” Cahillane, a veteran of the packaged food and drinks industry, will be leaving the combined company when the deal closes.
The deal is expected to close in the first half of 2025. Upon completion, Kellanova will become a part of Mars Snacking, which is led by Global President Andrew Clarke. It will be based in Chicago, but unlike competitor Nestle, Mars has no intention currently to develop new products specifically for individuals using the weight loss drugs Ozempic and Wegovy, which has been raising investors’ concerns surrounding the decline of sales. However, the individuals will still have options with the company, with Weihrauch stating that half of the company’s portfolio will be “wholesome” snacks such as low-calorie Special K, Kind bars, and Nutri-grain.
