M&M maker Mars is buying Kellanova, the maker of Cheez-Its and Pop-Tarts, for nearly $30 billion to broaden its snack portfolio and expand globally.
Kellanova was created last year when Kellogg Co. split into two companies. Chicago-based Kellanova sells many of the former company’s most profitable brands, including Pringles, Eggo, Town House, MorningStar Farms and Rice Krispies Treats. The company had net sales of more than $13 billion last year and employs about 23,000 people.
Mars Inc. said Wednesday it would pay $83.50 per share in cash. The company put the total value of the transaction, including debt, at $35.9 billion.
The deal will give Mars significantly greater purchasing power with suppliers and a stronger sales position in negotiations with grocers and other retailers, said Randal Kenworthy, a senior partner specializing in consumer goods at consulting firm West Monroe.
Together, Mars and Kellanova control about 8 percent of the U.S. snack market, he said. PepsiCo, which owns Frito-Lay, has a share of 9 percent.
Kellanova also has a larger international presence, which will help Mars as it expands overseas, Kenworthy said. And Mars has made many improvements in its organizational efficiency that can be applied to Kellanova, he said.
“Strategically, it makes a lot of sense,” Kenworthy said.
It is the largest deal in the industry since JM Smucker’s acquisition of Hostess last year for $5.6 billion and one of the largest deals of 2024 after Exxon Mobil’s acquisition of Pioneer Natural Resources for $60 billion and Capital One Financial’s acquisition of Discover Financial Services for $35 billion.
Steve Cahillane, CEO, president and chairman of Kellanova, said Mars contacted Kellanova several months ago to discuss the deal. Cahillane noted that Kellanova has reported higher-than-expected revenue in recent quarters and reiterated its full-year guidance despite challenging economic conditions.
“I suspect that Mars — when they saw this dynamic — made them step forward and say, ‘You know, now is the time, we should talk to these people,'” Cahillane said in an interview with the Associated Press. “So it was that simple.”
Mars’ purchase of Kellanova is expected to close in the first half of next year. Once the purchase is complete, Kellanova will become part of Mars Snacking, which is also based in Chicago.
Cahillane said that while some corporate functions may be consolidated, he expects most of Kellanova’s employees to be integrated into Mars.
“They have gum factories, they have pet food factories, we have Pringles and Cheez-It factories. They can’t make our food in their factories,” he said. Cahillane said he would manage Kellanova until the deal was finalized.
Mars, based in McLean, Virginia, is one of the largest private companies in the United States. The company reported net sales of $50 billion last year and employs 150,000 people.
“The Kellanova brands significantly expand our snacking platform, enabling us to more effectively meet consumer needs and drive profitable business growth,” said Andrew Clarke, global president of Mars Snacking, in a statement.
Arun Sundaram, an analyst at investment research firm CFRA, expects U.S. antitrust regulators to closely scrutinize the deal given current high food prices. He believes the deal will ultimately go through because there is so little overlap between the two companies’ portfolios.
Kenworthy said regulators may be concerned about the overlap in the two companies’ healthier snacks. Kellanova owns the RxBar and NutriGrain brands, while Mars owns Kind and Nature’s Bakery. But Cahillane said the overlap is very minimal in the large and fragmented healthy bar category.
The acquisition would expand Mars’ reach into the salty snack category. The company owns brands such as Combos and Ben’s Original, but is best known for its chocolate, candy and pet food. Mars makes M&M’s, Lifesavers, Juicy Fruit gum and Skittles, among others, as well as pet food from Pedigree and Royal Canin.
Sales of some Mars products, such as gum, have declined in recent years as snacking habits have changed. And chocolate sales have declined in the U.S. as younger customers seek out other flavors, such as sour candy. According to Nielsen IQ, chocolate sales in the U.S. fell 5.5 percent last year.
Other companies have also expanded their product ranges to include salty snacks to meet changing American tastes. In 2017, chocolate bar maker Hershey acquired Amplify, the maker of Skinny Pop popcorn, for $1.2 billion. Four years later, Hershey spent another $1.2 billion on Dot’s Homestyle Pretzels.
The acquisition would also open the door to potentially lucrative product combinations such as Skittles-flavored Pop-Tarts or Snickers-flavored Pringles. Such limited-time offers are becoming more common as food companies try to grab consumers’ attention and gain space on store shelves.
Kenworthy said the timing is ideal because falling inflation and falling prices will make branded snacks more attractive to customers who have switched to cheaper store brands. Economists say many consumers appear to be returning to pre-pandemic norms, when most companies felt they could not raise prices significantly without losing sales. Kellanova cut its prices in North America by 1% in the second quarter and saw sales rise 2%.
The other company that emerged from the Kellogg split, WK Kellogg Co., kept its cereal brands such as Raisin Bran, Frosted Flakes and Froot Loops, which have struggled with declining sales in recent years. The company is not involved in the deal.
“Mars gets the crown jewels in terms of spin-off components,” Kenworthy said.
Mars began in 1911 when founder Frank Mars began making and selling buttercream candies in his home in Tacoma, Washington. The company moved to Chicago in 1929 and launched the Snickers bar the following year.
Mars has grown steadily through acquisitions. In 1935, the company entered the pet food business by purchasing a British dog food brand and in 1986, it bought the Dove ice cream brand. In 2008, the company bought Wrigley’s chewing gum business for $23 billion.
Kellanova shares rose nearly 8% on Wednesday to close at $80.28.
This story has been updated to correct that the Mars brand is Ben’s Original, not Uncle Ben’s.
