MCLEAN, VA. — In one big transaction, Mars Inc. is set to transform its candy-based snack business into a diverse portfolio anchored in grain-based baked foods through its planned acquisition of Kellanova.  

The $35.9 billion deal, announced Aug. 14, would firmly plant Mars – known primarily for candy and chocolate brands like Snickers, M&M’s, Mars, Twix, Dove, Milky Way, 3 Musketeers, Skittles, Extra, Wrigley’s Doublemint, Life Savers and Starburst – in the cracker, salty snacks, bar and breakfast sections of the grocery store. The roster for Kellanova, the snack company spun off by The Kellogg Co. less than a year ago, spans a host of popular brands, led by Pringles, Cheez-It, Pop-Tarts, Rice Krispies Treats, NutriGrain, RxBar and, in the frozen breakfast category, Eggo.

In the packaged foods sector, snacks have gained more prominence in recent years as more on-the-go consumers focus on eating smaller portions throughout the day. McLean, Va.-based Mars said the addition of Kellanova would spur its plan to double its Mars Snacking business over the next decade. That business unit already includes 15 billion-dollar brands, and Kellanova would add two more: Pringles and Cheez-It. What’s more, Mars said the deal boosts its presence in better-for-you snacks with Kellanova brands like RxBar and NutriGrain added to the portfolio.

Plans call for Kellanova to be integrated into Mars Snacking, led by global president Andrew Clarke and based in Chicago. He called the transaction “an exciting opportunity to create a broader global snacking business” that will enable “Kellanova and Mars Snacking to both achieve their full potential.”

“Kellanova and Mars share long histories of building globally recognized and beloved brands,” Clarke said. “The Kellanova brands significantly expand our snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth. Our complementary portfolios, routes-to-market and R&D capabilities will unleash enhanced consumer-centric innovation to shape the future of responsible snacking.”

The companies expect the acquisition – which will take publicly held Kellanova private into family-owned Mars – to close in the first half of 2025, pending shareholder approval, regulatory clearance and other customary closing conditions. News of a potential purchase of Kellanova by Mars surfaced just over a week before the companies announced an agreement.

“This acquisition would be one of the largest deals ever in the packaged foods space, and one that could spark more consolidation among food companies,” CFRA Research analyst Arun Sundaram said in an Aug. 14 research note. “This is a good marriage between two high-caliber food companies, as Mars is known for its innovation and brand-building, while Kellanova has the global reach to bring more Mars products to more markets.

“We expect antitrust scrutiny, given the sheer size of the deal against the current backdrop of rising food prices,” Sundaram said. “However, we think the deal will ultimately go through, given the limited category overlap between the two companies. Mars is primarily a confectionery producer, with iconic brands like Snickers, M&M’s and Twix. It also has a very large pet business, with brands like Royal Canin and Pedigree. Kellanova predominantly competes in the salty snacks market with brands like Pringles and Cheez-It.”

The Mars-Kellanova combination

Together, Mars and Kellanova would form a global company with annual revenue of more than $63 billion and 173,000 employees. The combined business’ product categories would span snacking, food and pet care on a worldwide basis, frozen breakfast and plant-based foods in North America, and cereal and noodles internationally.

Mars, with over 150,000 employees, said it had net sales of more than $50 billion in 2023. Kellanova’s 2023 net sales topped $13 billion, and the company said it has a presence in 180 markets globally and about 23,000 employees.

Kellanova brings a “portfolio of growing global brands” that would offer a “substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future,” according to Poul Weihrauch, chief executive officer and Office of the President at Mars Inc.

“We will honor the heritage and innovation behind Kellanova’s incredible snacking and food brands while combining our respective strengths to deliver more choice and innovation to consumers and customers,” Weihrauch said. “We have tremendous respect for the storied legacy that Kellanova has built and look forward to welcoming the Kellanova team.”

Mars’ business units include Mars Snacking, Mars Petcare and Mars Food & Nutrition. In addition to brands already mentioned, Mars’ snack offerings run from chocolate (American Heritage, Bounty, Celebrations, Ethel M, Galaxy, Hotel Chocolat, Maltesers, Trü Frü), to candy and chewing gum (Altoids, 5, Big Red, Eclipse, Juicy Fruit, Wrigley’s Spearmint and Winterfresh, Hubba Bubba, Orbit), to snack/nutrition/breakfast bars (Kind), and to baked snacks under brands like Balisto (biscuits), Combos (bite-size cracker, pretzel and tortilla stuffed snacks) and Nature’s Bakery (fig, oatmeal crumble and brownie bar snacks).

On the food side, Mars offers products in such segments as rice and grains, sauces, spreads, shelf-stable and refrigerated entrees, soups and sides, cooking aids, better-for-you items and ethnic dishes in over a dozen brands, including Ben’s Original, MasterFoods, Seeds of Change, Tasty Bite, Foodspring, Dolmio and Kevin's Natural Foods. Mars Petcare’s product roster includes 10 brands tallying over $1 billion in sales that offers such pet food brands as Pedigree, Iams, Whiskas and Sheba.

“The acquisition of Kellanova unlocks a significant opportunity for Mars to meaningfully compete with iconic brands in the growing category of salty snacks,” said John Oh, an analyst at the investment research firm Third Bridge. “Our experts tell us Cheez-it and Pringles are the foundational growth engines for Kellanova. Now under Mars, the additional scale should bode well for these iconic brands to unlock further growth, particularly in international markets such as Europe and Latin America.”

Other Kellanova brands that would join Mars’ portfolio include Kellogg’s Club, Kellogg’s Grahams, Carr’s and Zesta (crackers); Town House (crackers, flatbread, pita snacks); Toasteds (crackers and flatbread); Austin (sandwich crackers); MorningStar Farms (plant-based foods); Pure Organic (fruit snacks); and Special K (cereal) in North America, as well as the Kellogg’s international cereal business.

Besides the $23 billion Wrigley acquisition in 2008, Mars has expanded its product portfolio in recent years with deals that added Kind Snacks’ North America business and Nature’s Bakery in 2020 and Trü Frü in 2022.

“Mars’ acquisition of Kellanova solidifies its position as a leader in the snacking industry by bringing iconic brands like Cheez-It into its portfolio, and in turn diversifying its product offerings and strengthening its market position,” said Geoff Coltman, senior vice president at Catena Solutions, a supply-chain consultancy in the food and beverage arena. “By expanding its presence in the savory snack segment, the acquisition allows Mars to cater to a wider range of consumer preferences and hit on their strategic initiative of doubling down on their snacking portfolio.”

Kellogg returns to its roots

Kellanova became a possible acquisition target in the wake of its spin-off from The Kellogg Co., according to industry observers. The move was seen as a way to unlock the potential growth of Kellogg’s snack business in line with consumer trends.

Battle Creek, Mich.-based Kellogg announced in late June 2022 that it aimed to spin off its core businesses into three separate companies, focusing on global snacking, North American cereal and plant-based foods. Then in mid-March 2023, Kellogg tweaked the plan and said it would split into two separate public companies, named Kellanova and WK Kellogg Co.

At the time, the companies said Kellanova accounted for about 85% of Kellogg’s business, with WK Kellogg representing 15%. The split was completed in early October 2023, and Kellogg shareholders received one share of WK Kellogg for every four shares of Kellogg Co. owned.

Thus far, company executives and Wall Street analysts have deemed Kellogg’s split as achieving what was intended: enabling two different businesses to perform better on their own. But with Mars’ move to acquire Kellanova, the remainder of the iconic Kellogg Co. – WK Kellogg – stands as a much smaller business with less than $3 billion in annual sales. Though focused solely on 117-year-old Kellogg’s roots as a cereal company, WK Kellogg sports a lineup of household names, including Kellogg’s, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi and Bear Naked.

Steve Cahillane, chairman, president and CEO of Kellanova (who held the same titles at Kellogg Co.), called the Mars-Kellanova deal “a truly historic combination with a compelling cultural and strategic fit.”

“Kellanova has been on a transformation journey to become the world’s best snacking company, and this opportunity to join Mars enables us to accelerate the realization of our full potential and our vision,” Cahillane said. “The transaction maximizes shareholder value through an all-cash transaction at an attractive purchase price and creates new and exciting opportunities for our employees, customers and suppliers. We are excited for Kellanova’s next chapter as part of Mars, which will bring together both companies’ world-class talent and capabilities and our shared commitment to helping our communities thrive. With a proven track record of successfully and sustainably nurturing and growing acquired businesses, we are confident Mars is a natural home for the Kellanova brands and employees.”

Transaction closeup

Under the agreement, Mars is slated to acquire all outstanding equity of Kellanova for $83.50 per share in cash, for a total deal value of $35.9 billion, including assumed debt. The purchase encompasses all Kellanova’s brands, assets and operations, including its snacking, international cereal and noodles, and North American plant-based foods and frozen breakfast businesses. Privately held Mars said it aims to finance the transaction via cash on hand and new debt.

Kellanova’s board has approved the deal, and the W.K. Kellogg Foundation Trust and the Gund Family have agreed to vote shares representing 20.7% of Kellanova’s common stock in support of the transaction, Mars said, adding that Battle Creek will “remain a core location” for the combined organization.

Common shares of Kellanova hovered between $55 and $60 through the end of July and then jumped to over $75 at close on Aug. 5, when buzz of a potential acquisition by Mars hit the news. Kellanova shares finished at $80.28 on Aug. 14, the day that the deal was announced, with a 52-week range of $47.63 to $80.46. WK Kellogg’s shares closed at $16.51 on Aug. 14, with a 52-week range of $9.65 to $24.63.

The acquisition’s transaction price of $83.50 reflects a premium of 44% to Kellanova’s unaffected 30-trading day volume weighted average price and a premium of 33% to Kellanova’s unaffected 52-week high as of Aug. 2, according to Mars.

“We believe that Kellanova’s portfolio of popular snack brands will fit well with Mars’ and help them expand scale in international markets,” TD Cowen analyst Robert Moskow wrote in an Aug. 5 research note as speculation about a deal mounted. “The merger could usher in another cycle of consolidation in the packaged foods space similar to 1999-2001, thus providing a boost to valuations,” he said, citing past acquisitions such as General Mills of Pillsbury, Kraft of Nabsico, Kellogg of Keebler and Conagra of International Home Foods.

Kellanova’s $13 billion business breaks down to approximately 62% in snacks, 21% in cereal and 17% in other categories and “would be highly complementary to Mars,” Moskow noted, adding that over 25% of Kellnaova's sales come from emerging markets and 19% from Europe. TD Cowen estimated Mars’ sales at $50 billion – about 40% from pet care, 36% from snacks and 24% from other product segments – with more than half of the company's sales coming from international markets.