Food giant Mars Inc., popular for its iconic candy brands such as M&M's and Snickers, is reportedly on the verge of finalizing a nearly $30 billion acquisition of Kellanova.
The deal, expected to be announced Wednesday, would see Mars paying approximately $83.50 per share in cash for Kellanova, the company behind well-known brands like Pringles and Eggo waffles, The Wall Street Journal reported citing people familiar with the matter.
The potential merger would unite two significant players in the food industry to mark one of the major transactions of the year.
The packaged-food sector has been facing challenges such as shrinking sales volumes, sluggish growth, and weakening consumer demand globally. In response, companies are turning to innovation and exploring new markets to drive sales, especially as consumers grow resistant to rising prices.
Despite industry-wide challenges, Kellanova has outperformed many of its peers, delivering strong earnings since its separation from the cereal-focused WK Kellogg Co. late last year.
Boosted by new product launches and effective marketing strategies, Kellanova recently raised its full-year financial outlook following a robust second quarter.
For Mars, a privately held company, the acquisition of Kellanova represents an opportunity to diversify its portfolio beyond its core chocolate business, particularly as cocoa prices hit historic highs this year.
The acquisition would also enhance Mars' presence in international markets.
Industry analysts suggest that the Mars-Kellanova merger is unlikely to encounter significant antitrust hurdles due to the minimal overlap between the two companies' product lines.
In addition to its well-known iconic confectionery brands like Twix, Bounty, and Milky Way, Mars is a dominant force in the pet food industry and operates a vast network of veterinary health centers.
Meanwhile, Kellanova has carved out a niche in the salty snacks sector, both in the U.S. and internationally. The company also manages the cereal business outside North America, leaving WK Kellogg with control over the North American cereal operations of their original parent, Kellogg.
According to data from Numerator, salty snacks account for nearly half of Kellanova's annual sales, while Mars' snacking division — including chocolate, candy, gum, and bars — contributes about 38% to its total revenue.
When combined, Mars and Kellanova would represent approximately 12% of the U.S. snacking and candy market, based on NielsenIQ's market share data.
Despite this sizable share, the merger would still face stiff competition from major industry players like PepsiCo, Kraft Heinz, Mondelez, Hershey, and General Mills, all vying for consumer spending in a crowded market.
