Mars, the maker of such iconic brands as M&Ms and Snickers, announced it will acquire snacking giant Kellanova, which owns such well-known snacks as Pringles and Pop-Tarts. The $34.9 billion all cash deal will be financed with cash on hand and new debt and is expected to close during the first half of 2025.
“This is 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,” according to the deal’s press release. “Snacking is a large, attractive, and durable category that continues to grow in importance with consumers.”
Snack food volumes are down, however, having declined 6-8% since 2019. Despite this decline, snack companies have been able to increase profits due to higher prices. While food industry prices have increased 30%, prices in the candy, cookies, and salty snacks area in which Mars and Kellanova operate are up 40%.
The White House has been closely scrutinizing prices in the wake of public outcry from the checkout line. Memes and videos depicting sticker shock have gone viral as many Americans grapple with costs, prompting presidential candidates to weigh in on the issue.
Former President Trump has vowed to defeat inflation with tariffs, tax cuts, and cracking down on illegal immigration. Vice President Harris has touted a ban on price gouging that would police what the government deems “excessive” price hikes on essential products. She has also focused on the need for competition to keep prices in check. This places the Mars/Kellanova merger – with the snack behemoth it creates – in a precarious position.
Grocery Store Margins
The deal’s documents include the customary language that “[t]he transaction is subject to … customary closing conditions, including regulatory approvals,” and it is quite possible that the deal will face rigorous regulatory scrutiny under current and the future Administrations. Most analysts expect the deal to pass muster, however. As M&A lawyer Daryl Lansdale of Norton Rose Fulbright states in MarketWatch, “The businesses don’t overlap to a large degree. It depends on how you define the market for what these companies do. It will be interesting, but it will not be problematic.”
According to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, Mars is advised by Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. Kellanova is advised by Kirkland & Ellis LLP.
