Sweet and salty deal worth $30 billion would put M&M’s and Snickers alongside Cheez-It and Pringles

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Mars Inc., the company behind M&M’s and Snickers, is set to acquire Kellanova, the maker of popular snacks such as Cheez-Its and Pop-Tarts, in a major $30 billion transaction. This move aims to broaden Mars' snacking offerings and enhance its global presence.

Kellanova was formed last year following the split of Kellogg Co. into two separate entities. Based in Chicago, Kellanova handles several high-performing brands from Kellogg’s portfolio, including Pringles, Eggo, Town House, MorningStar Farms, and Rice Krispies Treats. The company reported net sales exceeding $13 billion last year and employs about 23,000 people.

Mars will purchase Kellanova for $83.50 per share in cash, bringing the total value of the acquisition, including debt, to approximately $35.9 billion.

Randal Kenworthy, a senior partner at the consulting firm West Monroe, highlighted that the merger would enhance Mars' negotiating leverage with suppliers and retailers. Combined, Mars and Kellanova will command around 8% of the U.S. snack market, positioning them closely behind PepsiCo’s 9% share with Frito-Lay. Kenworthy also noted that Kellanova’s extensive international reach would aid Mars in expanding its global footprint. Additionally, Mars' improvements in operational efficiency could benefit Kellanova.

“This acquisition is strategically sound,” Kenworthy remarked.

The deal marks one of the largest in the food sector this year, following J.M. Smucker’s $5.6 billion purchase of Hostess last year. Other significant transactions include Exxon Mobil’s $60 billion acquisition of Pioneer Natural Resources and Capital One Financial’s $35 billion purchase of Discover Financial Services.

Kellanova’s CEO, Steve Cahillane, revealed that Mars initiated discussions about the acquisition a few months ago. Cahillane pointed out that Kellanova’s recent revenue performance and optimistic outlook amid challenging economic conditions likely prompted Mars to act. “Mars saw the momentum and decided it was the right time to make a move,” Cahillane explained.

The acquisition is expected to be finalized in the first half of next year, at which point Kellanova will join Mars Snacking, also based in Chicago. Cahillane anticipates that while some corporate functions might be consolidated, most Kellanova employees will be integrated into Mars.

Mars, headquartered in McLean, Virginia, is one of the largest privately held companies in the U.S., with $50 billion in net sales last year and a workforce of 150,000. The company is known for its chocolates, candies, and pet foods, including M&M’s, Skittles, and Pedigree.

“The addition of Kellanova’s brands will significantly enhance our snacking platform, helping us better meet consumer needs and drive growth,” stated Andrew Clarke, Mars’ global president of Snacking.

Analysts anticipate U.S. antitrust regulators will closely examine the deal due to high food prices, although the limited overlap between the companies’ portfolios is expected to ease concerns. The minimal overlap in their healthier snack lines, such as Kellanova’s RxBar and NutriGrain versus Mars’ Kind and Nature’s Bakery, is also noted.

The acquisition could lead to innovative product combinations, such as Skittles-flavored Pop-Tarts or Snickers-flavored Pringles, as companies increasingly seek to capture consumer interest with unique offerings.

With inflation easing and consumers returning to pre-pandemic shopping habits, the timing of the deal is seen as advantageous. Kellanova recently reduced its North American prices by 1%, resulting in a 2% increase in sales volumes.

Mars, which began in 1911 with butter cream candy, has grown through strategic acquisitions, including the purchase of Wrigley in 2008 for $23 billion. Shares of Kellanova saw a nearly 8% increase in trading following the announcement of the deal.