By Anirban Sen
(Reuters) -Family-owned packaged food giant Mars, whose candy brands include M&M’s and Snickers, is exploring a possible acquisition of Kellanova, maker of snacks resembling Cheez-It and Pringles, in accordance with people acquainted with the matter.
A deal may be one among an important ever inside the packaged food sector, given Kellanova’s market value of about $27 billion including debt, and test the appetite of regulators to allow consolidation inside the sector.
Shares of Kellanova are up about 20% since it split from WK Kellogg Co last October, but are still trading at a discount to a number of of its peers, resembling Hershey and Mondelez International, making it a possible acquisition goal.
There isn’t a certainty that Kellanova will pursue a deal with Mars, the sources said. One other suitor could also approach Kellanova, and it’s possible that no deal with any party is reached, the sources added, requesting anonymity for the reason that matter is confidential.
Kellanova declined to comment, while spokespeople for Mars didn’t immediately reply to requests for comment.
Dealmaking inside the packaged food sector has been robust as corporations seek scale to weather the impact of price inflation and weight-loss drugs weighing on demand.
Last yr, J.M. Smucker acquired Twinkies maker Hostess Brands for $5.6 billion, in a deal that united two major American snack makers.
But numerous the deals have been smaller than the mega merger between Heinz and Kraft clinched almost a decade ago, as U.S. antitrust regulators have turn into more concerned about such transactions leading to higher prices and fewer decisions for consumers.
Food prices have risen 25% between 2019 and 2023, faster than other consumer goods and services, in accordance with recent statistics from U.S. Department of Agriculture.
The Federal Trade Commission and the state of Colorado have sued to dam grocery store operator Kroger’s $25 billion proposed acquisition of Albertsons, citing concerns the deal would hike prices for tens of hundreds of thousands of Americans.
A deal for Kellanova may be an important ever for Mars, dwarfing its $9.1 billion takeover of veterinary hospital operator VCA in 2017.
The McLean, Virginia-based company has been trying to find to diversify its business through acquisitions. It’s owned by its founder Frank C. Mars’ descendants and generates about $47 billion in annual sales. It operates under three divisions; Mars Petcare, Mars Snacking, and Mars Food & Nutrition.
Kellanova makes its products in 21 countries and markets them in greater than 180 countries. Its separation from WK Kellogg last yr left Kellanova with snacks, resembling Pop-Tarts and Rice Krispies Treats, frozen breakfast foods, resembling Morningstar Farms and Eggo, and a world cereal division.
WK Kellogg, which has a market value of $1.5 billion, kept the cereal business in North America, including Kellogg’s, Froot Loops, Frosted Flakes and Rice Krispies cereals, under a licensing agreement it inked with Kellanova.
Reuters reported in May that investment firm TOMS Capital Investment Management had taken a stake in Kellanova and was discussing with the company the way it could actually improve shareholder returns. The most important points of the discussions between TOMS and Kellanova couldn’t be learned.
(Reporting by Anirban Sen in Latest York; Additional reporting by Abigail Summerville in Latest York; Editing by Diane Craft and Daniel Wallis)