Mars, the maker of M&M’s, is buying Kellanova, the maker of Cheez-Its and Pop-Tarts, for nearly $30 billion in a bid to expand its snack portfolio and expand globally.
Kellanova was created last year when the Kellogg The company was split into two companies. Chicago-based Kellanova sells most of the old company’s most profitable brands, including Pringles, Eggo, Town House, MorningStar Farms and Rice Krispies Treats. It had net sales of more than $13 billion last year and has about 23,000 employees.
Mars Inc. said Wednesday it will pay $83.50 per share in cash. The company estimated the total value of the deal at $35.9 billion, including debt.
The deal will give Mars significantly more buying power with suppliers and selling leverage in negotiations with grocers and other retailers, said Randal Kenworthy, a senior partner specializing in consumer products at the West Monroe consulting firm.
Mars and Kellanova together would control about 8% of the U.S. snack market, he said, compared with 9% for PepsiCo, which owns Frito-Lay.
Kellanova also has a larger international presence, which will help Mars expand overseas, Kenworthy said. And Mars has made many improvements to its organizational efficiency that it can apply to Kellanova, he added.
“From a strategic perspective, it makes a lot of sense,” Kenworthy said.
This is the largest transaction in the sector since JM Smucker bought Hostess for $5.6 billion last year, and among the largest of 2024 behind that of Exxon Mobil $60 billion acquisition from Pioneer Natural Resources and Capital One Financial $35 billion acquisition from Discover Financial Services.
Steve Cahillane, Kellanova’s CEO and chairman, said Mars approached Kellanova a few months ago to discuss the deal. Cahillane noted that Kellanova has delivered better-than-expected revenue in recent quarters and reaffirmed its full-year guidance despite challenging economic conditions.
“I think Mars, seeing that dynamic, pushed them to come forward and say, ‘You know, this is the time, we should talk to these guys,’” Cahillane told The Associated Press in an interview. “It was really that simple.”
Mars’ acquisition of Kellanova is expected to close in the first half of next year. Once the deal is complete, Kellanova will become part of Mars Snacking, also based in Chicago.
Cahillane said that while some functions of the company could be consolidated, he expects most of Kellanova’s employees to be integrated into Mars.
“They have gum factories, they have pet food factories, we have Pringles and Cheez-It factories. We can’t make our food in their factories,” he said. Cahillane said he would run Kellanova until the deal is completed.
Mars, headquartered in McLean, Virginia, is one of the largest privately held companies in the United States. Mars reported net sales of $50 billion last year and has 150,000 employees.
“The Kellanova brands significantly expand our snacking platform, enabling us to meet consumer needs even more effectively and drive profitable business growth,” Andrew Clarke, global president of Mars Snacking, said in a statement.
Arun Sundaram, an analyst at CFRA, an investment research firm, believes that U.S. antitrust authorities will scrutinize the deal in the current context of rising food prices. He believes the deal will ultimately go through because the two companies’ portfolios have very little overlap.
Kenworthy said regulators might be concerned about the overlap in healthier snacks between the two companies. Kellanova owns the RxBar and NutriGrain brands while Mars owns Kind and Nature’s Bakery. But Cahillane said the overlap is very small in the large and fragmented health bar category.
The acquisition would allow Mars to expand its presence in the savory snacks sector. The company owns brands such as Combos and Ben’s Original, but is best known for its chocolates, candy and pet food. Mars makes M&M’s, Lifesavers, Juicy Fruit gum and Skittles, as well as Pedigree and Royal Canin pet food, among other products.
Sales of certain Mars products, like gumhave been declining in recent years due to changing snacking habits. Chocolate sales have also declined in the United States as younger consumers seek out alternative flavors, such as sour candy. Unit sales of chocolate in the United States fell 5.5% over the past year, according to Nielsen IQ.
Other companies have also added salty snacks to their lineup in an effort to change Americans’ tastes. In 2017, the chocolate bar maker Hershey Acquires Amplifythe maker of Skinny Pop popcorn, for $1.2 billion. Four years later, Hershey spent an additional $1.2 billion for Dot’s homemade pretzels.
The acquisition would also open the door to potentially lucrative product combinations like Skittles-flavored Pop-Tarts or Snickers-flavored Pringles. Such limited-time offerings that appeared more frequently as food companies try to grab consumers’ attention and gain shelf space.
Kenworthy said the timing was ideal because lower inflation and prices would make branded snacks more attractive to customers who have been switching to cheaper store brands. Economists say many Consumers seem to be coming back Pricing has been brought back to pre-pandemic levels, when most companies felt they couldn’t raise prices much without losing customers. Kellanova cut prices 1% in North America in the second quarter and saw sales volumes increase 2%.
The other company spun off from Kellogg, W.K. Kellogg Co., retained cereal brands such as Raisin Bran, Frosted Flakes and Froot Loops, which have suffered slowing sales in recent years. It is not involved in the deal.
“Mars gets the crown jewels in terms of derivative components,” Kenworthy said.
Mars began in 1911, when founder Frank Mars began making and selling buttercream candies from his home in Tacoma, Washington. The company moved to Chicago in 1929 and launched the Snickers bar the following year.
Mars has grown steadily through acquisitions. The company entered the pet food business in 1935 with the purchase of a British dog food brand and bought the Dove ice cream brand in 1986. In 2008, it bought the Wrigley chewing gum business for $23 billion.
Kellanova shares rose nearly 8% to close at $80.28 on Wednesday.
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This story has been updated to correct that the Mars brand is Ben’s Original, not Uncle Ben’s.
