In a deal worth $54.5 billion (US$35.9 billion), global food business Mars is acquiring snacks and cereal giant Kellanova as it looks to double its Snacking business in the next decade. All 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 will pay US$83.50 per share in cash, and says it intends to fully finance the acquisition through a combination of cash-on-hand and new debt that has already been secured.
The price reflects a premium of approximately 44 per cent to Kellanova’s unaffected 30-trading day volume weighted average price and a premium of around 33 per cent to Kellanova’s unaffected 52-week high as of 2 August 2024. The price is an acquisition multiple of 16.4x LTM (last twelve months) adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) at 29 June 2024.
Kellanova will become part of Mars Snacking, led by global president, Andrew Clarke, and headquartered in Chicago. Clarke said it was an opportunity for the company to build a broader, global snacking business.
“Kellanova and Mars share long histories of building globally recognised and beloved brands. The Kellanova brands significantly expand our Snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth.
“Our complementary portfolios, routes-to-market and R&D capabilities will unleash enhanced consumer-centric innovation to shape the future of responsible snacking,” Clarke said.
The agreement has been unanimously approved by the Kellanova board of directors.
Big players, big deal
It’s the biggest packaged foods acquisitions since H.J. Heinz Co bought Kraft Foods Group in 2015 for US$46 billion and second biggest deal in more two decades.
Kellanova’s snacking portfolio includes Pringles, Cheez-It, Pop-Tarts, Nutrigrain, and food brands including Kellogg’s, Eggo, and MorningStar Farms.
In 2023, Kellanova had net sales of US$13 billion in 180 markets with around 23,000 employees.
Kellanova split from WK Kellogg Co in October 2023, taking the snacking business and some cereal brands: Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies Treats, MorningStar Farms, Incogmeato, Gardenburger, Nutri-Grain, RXBAR, and Eggo; and cereal brands Kellogg’s, Frosties, Zucaritas, Special K, Krave, Miel Pops, Coco Pops, and Crunchy Nut.
WK Kelllog retained Kellogg’s, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi, and Bear Naked.
Mars Snacking accounted for 38 per cent of the company’s net sales in FY23, with brands Snickers, M& M’s, Twix, and Extra all generating more than US$1 billion net sales in CY23.
It’s Petcare business – with 10 US$1 billion brands including Royal Canin, Pedigree, and Whiskas – accounts for 59 per cent of net sales in FY23. Mars Food & Nutrition makes up three per cent of net sales with brands Masterfoods, Dolmio, Ben’s Original, and Kan Tong. Its net sales in 2023 were US$50 billion.
Mars Snacking operates 53 factories around the world, is in 180 countries and employs roughly 34,000 people.
The deal will add two US$1 billion brands to the business in Pringles and Cheez-It as well as expanding Mars’ health and wellness Snacking portfolio.
Kellanova would add a broader range of salty snacks to Mars, which has more chocolate bars than chips or crackers, with Kellanova’s portfolio including “beloved and growing brands with untapped potential”.
“The majority of Kellanova snacking brands outperform category competitors, particularly among Gen Z and Millennial consumers.
“Kellanova’s differentiated brand portfolio is defined by uniqueness, delivering category leadership and spring-loaded platforms for future growth. Delivers stronger, differentiated portfolio and distribution platform for priority international markets,” the company said it its announcement.
