Too much munch? Not yet. Candy giant Mars has inked a $35.9B deal for snack maker Kellanova (K) - including assumed net leverage - in what is set to ...
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| | Top News  Getty Images Too much munch? Not yet. Candy giant Mars has inked a $35.9B deal for snack maker Kellanova (K) - including assumed net leverage - in what is set to become one of the biggest M&A headlines of the year. The tie-up will pair the company behind M&M's, Snickers and Skittles with the producer of Pringles, Cheez-It and Pop-Tarts, meaning the next time you reach for a quick packaged bite, it may ring the register of the same privately held conglomerate.
Snapshot: Kellanova shares are up on the news premarket, climbing 8% to above $80. That's near the $83.50 per share level apparently agreed to by Mars in the all-cash deal, and up from the $60 level since reports of the merger first surfaced in early August. Kellanova was spun off from cereal-focused WK Kellogg (KLG) last year and has since posted a series of strong earnings, even raising its guidance for FY24 after its most recent analyst-beating results.
Not everyone in the packaged food industry has been so lucky. There are fears of slowing growth and a weakening consumer, prompting companies to look for ways to bolster sales and their bottom lines. Some are turning to new markets and innovation, but a merger with a successful company can also do the trick. Diversification for chocolate-heavy Mars is also necessary due to supply risks, especially with cocoa prices hitting record levels this year.
What to watch: The latest deal would be the largest packaged-food transaction since the merger between Kraft and H.J. Heinz in 2015, and some are even anticipating a new era of food-industry consolidation. That has raised the risk of antitrust hurdles, with the DOJ and FTC under the Biden administration aggressively challenging big mergers and acquisitions. Others have said there is limited overlap between the actual product lines between Mars and Kellanova (and remember that Mars successfully took over Wrigley for $23B in 2008). | | Featured  Want to get more from investing efforts? Take our world-class Premium service for a test drive. Sign up now, and you can try all of Premium's powerful tools and resources: - Our proprietary Quant ratings, plus ratings from Wall St. and analysts on Seeking Alpha
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