On August 14th 2024, US based food and confectionery conglomerate Mars announced their acquisition of Kellanova, a global leader in snacking, cereal and noodles. The deal is being financially advised by Goldman Sachs and Lazard for Kellanova, and Citigroup for Mars. Kellanova accepted the $35.9 billion all-cash offer, representing an adjusted EBITDA multiple of 16.4x. Mars agreed on the acquisition at $83.50 per share, reflecting a 33% premium on Kellanova’s closing price. At such a price tag, this proves to be the largest M&A deal of 2024 to date. Alongside cash, the deal is being financed with a debt commitment of $29 billion provided by JP Morgan and Citi.
US food giant Mars is an international conglomerate with an impressive portfolio of strong brands across subverticals like confectionery, pet care and food & nutrition. Drawing in over $50 billion in annual sales, the company is one of the most established in the global consumer space. With underlying consumer demands and tastes constantly evolving, Mars has announced their strategic vision to double Mars snacking in the next decade, which is why the acquisition of Kellanova, with billion dollar brands such as Pringles and Cheez-It, proves to be quite attractive. The sheer scale of both companies means that this deal, if completed, will reportedly be the largest in the packaged food industry in over a decade, ever since Mars’ acquisition of Wrigley in 2008 for $23 billion.
Kellanova is originally a spinoff company from Kellogg’s, which actually broke away into 2 separate companies in late 2023. Kellanova itself is rooted in a salty snacks business yet also owns a strong array of brands accounting for a multitude of consumer tastes, such as Pop Tarts, Nutrigrain, and Rice Krispies. The deal comes after an industry-wide trend in stalling growth from price inflation affecting consumer demand for packaged foods. However, Kellanova has managed to exceed expectations and the industry averages with its latest earnings. Through this acquisition, Mars aims to hold prices steady and not pass on the costs of both the deal and previous inflationary pressures onto customers, absorbing larger costs into the structure of the business itself. Mars and Kellanova certainly have a differentiated portfolio among each other, but one of the main benefits of this deal is the mutual expansion of the distribution networks of the pro-forma company. Mars aims to leverage the consumer demands in fast-growing geographies such as Africa and Latin America, where Kellanova has an established market presence and supply chains. Similarly, Mars’ presence in China will “offer an enormous opportunity for Pringles”.
The deal has faced a varied response, particularly revolving around the price of the acquisition. Whilst existing equity and debtholders have seen the value of their stakes shoot up, many have said that the price implies too high of a multiple for Kellanova, especially at a time where consumers have been more health-conscious than ever before. The legal sentiment is also mixed, with some highlighting the strong regulatory scrutiny of larger deals from US competition watchdogs as of late. However, other legal experts have argued that due to the limited overlap in the offerings of the two companies, there will few antitrust roadblocks preventing the deal from going through.
Written by: Siddh Patel
Sources: FT, Reuters, Mars Press Release
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