Privately held Mars is buying Kellanova (NYSE:K), the snacks division of cereal giant Kellogg’s. The stock will be bought for $83.50 per share.
Before the announcement, K stock was selling for $74.50 per share. It was about $80 before the market opened today.
CNN said the all-cash deal was worth $29.5 billion, but The New York Times said it was worth $35.9 billion. The difference is mainly due to the $5 billion in long-term debt Kellanova had on its balance sheet at the end of June.
Split and Sell
Something like this became likely last October when Kellogg’s breakup became official. The remaining cereal business is called W.K. Kellogg (NYSE:KLG), and has a market capitalization of about $1.4 billion. Kellanova shareholders were given one share of KLG for each Kellanova share they held, with the latter retaining the company’s stock symbol of K.
Kellogg’s believed investors weren’t properly valuing the company, which is known for brands like Kellogg’s Corn Flakes and Special K. The break, announced in June 2022, was designed to separate out faster-growing snack brands like Cheez-Its, Pringle’s and Eggo. After the split, Kellanova maintained dual offices in Chicago and Kellogg’s traditional home of Battle Creek, Michigan. Mars is based in McLean, Virginia.
Mars, best known for candy like M&Ms and Snickers, has become a pet care giant in recent years. Last year, it received 20% of its revenue from pets, and its veterinary units grew at 5-6%, a faster rate than the candy business. Mars’s veterinary units include Banfield Pet Hospitals and VCA Animal Hospitals, as well as veterinary chains in Europe and Singapore.
The best-known food brand in the Petcare portfolio may be Pedigree dog food, which suffered a recall in May. The unit also sells Whiskas cat food and Royal Canin dog food.
K Stock: What Happens Next?
The deal should clear antitrust scrutiny easily since Kellanova sells salty snacks and Mars sweet snacks. It also balances out Mars’ growth in pet care.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
