Mars is reportedly planning to acquire Kellanova. This deal could represent one of the largest transactions in the packaged food sector as Kellanova is valued at approximately $22 billion.
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The acquisition is expected to be worth around $30 billion. This valuation includes Kellanova’s market value and debt.
Kellanova was formed following the split of Kellogg into two separate entities last year. While Kellanova focuses on snacks and convenience foods, the other entity, WK Kellogg, concentrates on cereals.
Kellanova’s portfolio includes well-known brands such as Pop-Tarts, Eggo, Pringles and Rice Krispies Treats.
Mars is known for its popular brands like M&Ms and Snickers and has been diversifying its business interests.
The company has addressed its pet food and pet care divisions. The acquisition of Kellanova would bolster Mars’ presence in the snack sector and enhance its scale in international markets.
Following the news Kellanova’s shares surged by nearly 20%. The stock rose to $74.33 on the day of the announcement.
Industry analysts have highlighted the fit between Mars and Kellanova’s product portfolios. Robert Moskow of TD Cowen said that Kellanova’s popular snack brands would complement Mars’ offerings and aid in international market expansion.
Additionally analysts have suggested that Kellanova could fetch upwards of $87 per share in any final deal.
While Mars is currently the frontrunner in the acquisition talks, other companies such as Mondelez (the owner of Cadbury) could also emerge as potential suitors.
The packaged food sector has seen increased M&A activity over the past year. Deals include Campbell Soup’s $2.3 billion acquisition of Sovos Brands, the owner of Rao’s pasta sauces and J.M. Smucker’s $5.6 billion purchase of Hostess Brands, the maker of Twinkies.
The inflation and higher borrowing costs have affected consumer spending patterns leading to a decline in sales for many consumer packaged goods companies.
Mars is a family-owned giant known for its range of consumer products including candy brands like M&M’s, Snickers and Skittles, as well as its presence in the pet care industry through brands such as Pedigree and Whiskas.
Mars has been active in mergers and acquisitions over the past few years. Some acquisitions include, Kevin’s Natural Foods was acquired in 2023 for approximately $800 million expanding Mars’ portfolio into ready meals and sauces.
Tru Fru was acquired in 2022 focusing on chocolate-covered fruit snacks. Nature’s Bakery was acquired in 2020 for $400 million through Kind, which Mars fully owns.
VCA, A veterinary hospital chain acquired in 2017 for $9.1 billion.
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Kellanova was spun off from Kellogg Co in October 2023 focusing on snacks, frozen foods, noodles and cereals outside of North America.
Kellanova holds a market capitalization of approximately $22 billion with popular brands like Pringles, Cheez-It, RXBar and Pop-Tarts under its umbrella.
The company posted $13 billion in sales in the last fiscal year. Second-quarter sales growth for 2024 was 4%, with $3.46 billion in organic sales.
Year-to-date sales have increased by 4.7% to $6.96 billion. Adjusted operating profit increased by 13.3% to $502 million in the second quarter with a 19.2% rise through the first half to $1.01 billion.
Acquiring Kellanova would enhance Mars’ snack offerings, giving them access to established brands such as Pringles and Cheez-It. Kellanova’s presence in over 180 countries would provide Mars with an international reach.
Kellanova shares have risen by 20% since the spinoff from Kellogg but still trade at a discount compared to peers like Hershey and Mondelez International.
Earlier in 2024, TOMS Capital, an investment firm acquired an undisclosed stake in Kellanova indicating strong market interest in the company’s potential for shareholder returns.
Kellanova has been at the forefront of incorporating artificial intelligence (AI) and machine learning (ML) into its operations.
Lesley Salmon, the company’s Chief Digital and Information Officer has highlighted how AI and ML are revolutionizing various aspects of the business from supply chain management to personalized marketing.
Kellanova uses generative AI to boost customer engagement through personalized recommendations based on consumer behavior and preferences.
These digital tools help the company optimize inventory management, demand forecasting and production planning.
The integration of AI and ML has provided Kellanova with advanced data analytics capabilities, allowing the company to make informed decisions and enhance its direct-to-customer (D2C) opportunities.
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