Mars to buy Pringles maker Kellanova in $36bn mega deal

Bengaluru/New York — Family-owned confectionery giant Mars is buying Pringles maker Kellanova in a nearly $36bn deal, bringing together brands from M&M’s and Snickers to Pop-Tarts, in the US’s biggest deal this year.

Mars said on Wednesday it would pay $83.50 per share for Kellanova, representing about a 33% premium to its closing price on August 2. The deal is a bet on consumers continuing to indulge in branded snacks, and comes as packaged food companies face stalling growth after years of price hikes to cover skyrocketing inflation.

The combined company aims to hold prices steady, said Mars CEO Poul Weihrauch in an interview on Wednesday, and not pass on costs from the deal to consumers.

“We are a big and stronger company,” Weihrauch said. “We hope to be able to absorb more costs in our structure and help alleviate the issues we have in an inflationary environment.”

Food prices in the US increased roughly 25% from 2019 through 2023, far more than other categories such as housing and medical care, according to data from the US department of agriculture. But inflation has started to moderate, according to the US consumer price index data released Wednesday.

Consumers in the US and Europe — major markets for both companies — have been looking for cheaper alternatives or ditching brands for cheaper private label goods.

Kellanova has seen private label encroach on its market share for cereal in Europe and other areas, said CEO Steve Cahillane. The company sells cereals such as Smacks, Frosties and Coco Pops in Europe, according to securities filings.

The US packaged food sector is seeing robust deal-making as companies seek scale to weather the impact of inflation-weary consumers cutting back and shifting their purchases to private label brands.

Investors are also worried about a decline in sales from the greater adoption of drugs such as Ozempic and Wegovy for weight loss, which curb appetites and lead to feelings of fullness.

Weihrauch said half of the company’s portfolio will be “wholesome” snacks such as low-calorie Special K, Kind bars and Nutri-grain.

Unlike competitor Nestlé, Mars has no plans to develop new products specifically for people using the weight-loss drugs, Weihrauch said.

Mars said it planned to bolster its snacking division, invest locally and introduce more healthy options through the deal, as the category is “attractive and durable”.

The company has a 4.54% share of the US snacking market, while Kellanova holds about 3.9%, according to data from GlobalData, well behind market leader PepsiCo.

Kellanova sells noodles in Africa, though the business has faced hurdles due to the continent’s economic struggles.

Cahillane said Kellanova’s distribution network in Africa offers Mars an opportunity to expand on the continent. Mars’ presence in China offers an “enormous” opportunity for Pringles, Cahillane said.

The acquisition, which dwarfs Mars’ $23bn takeover of Wrigley in 2008, is also not expected to face too many antitrust roadblocks due to the limited overlap in the offerings of the two companies, legal experts said.

After the completion of the deal in the first half of 2025, Kellanova will become a part of Mars Snacking, led by global president Andrew Clarke, the companies said. It will be based in Chicago.

Cahillane, a veteran of the packaged food and drinks industry who previously held positions at Coca-Cola, said he would be leaving the combined company when the deal closes.

Shares of Kellanova rose about 8% to $80.25 in early trade. On an equity basis, the company is valued at $28.58bn, according to a Reuters calculation.

Kellanova split from WK Kellogg last October.

Under the terms of the deal, Mars will have to pay a termination fee of $1.25bn in case of failure to obtain regulatory approvals, while Kellanova will have to pay $800m to Mars in case of a change in board recommendation.

Mars intends to finance the deal through cash and new debt. Citi is its financial adviser, while Goldman Sachs is advising Kellanova.

Reuters