The merger between Mars and Kellanova (K) is scheduled to close on December 11. The merger is expected to create a global snacking powerhouse focused on expanding consumer choice and driving innovation in the sector. The tie-up will pair the company behind M&M’s, Snickers, and Skittles with the producer of Pringles, Cheez-It, Eggo, Rice Krispies, and Pop-Tarts. Kellanova (K) was spun off from cereal-focused WK Kellogg (KLG) last year and has since posted a series of strong earnings.
Following the close of the pending transaction, Mars expects the combined snacking business to generate around $36 billion in annual revenues, with a portfolio that includes 9 billion-dollar brands. Mars Snacking will continue to be headquartered in Chicago, Illinois, and will operate in more than 145 markets, serving millions of consumers. Powered by a team of more than 50,000 associates, it will operate 80 global production facilities and more than 170 retail outlets like Hotel Chocolat and M&M’s World.
“This combination will bring together two purpose-driven and principles-led companies. I’m looking forward to seeing Kellanova people and brands thrive as part of Mars Snacking,” stated Kellanova (K) CEO Steve Cahillane.
The massive deal for Kellanova (K) arrived at a time when the packaged food sector has been struggling with a post-pandemic letdown in demand as consumers have sought out private-label alternatives, largely due to pricing. Of note, Kraft Heinz (KHC) is the only packaged food sector with a higher market cap than the premium offered by Mars for Kellanova (K), which may be an indication that valuations are low. A question for investors now is which additional food or beverage stocks are poised for an acquisition proposal?
The food and beverage companies that are closest in size to the combined Mars-Kellanova (K) entity are PepsiCo (PEP), Nestle (NSRGY), and Mondelez International (MDLZ), while Campbell’s (CPB), Ferrero, General Mills (GIS), and Conagra Brands (CAG) will all be competitors in certain categories.