Shares in Pringles and Pop Tarts maker, Kellanova, surged by 16% this week after it was reported that confectionery, food and pet care conglomerate Mars is preparing to buy it. That would be “one of the year’s biggest takeovers”, says the Financial Times.
Mars is one of the world’s largest privately held companies, with annual sales of more than $50 billion and more than 150,000 employees. The news also comes as Kellanova has “appeared to weather the slowdown in US consumer spending”, raising its full-year sales forecasts last week after its latest earnings “surpassed expectations”. The shares had gained 15% this year before the bid.
Should you buy Kellanova shares?
Buying Kellanova makes sense, say Crystal Tse and Deena Shanker on Bloomberg. It would give Mars “a greater variety of food labels including Pringles, Cheez-It and Pop Tarts”. It would also help Mars diversify its “chocolate-heavy brand portfolio” away from cocoa, “a commodity whose prices have spiked to historic levels this year and whose outlook remains uncertain”.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Kellanova would also help Mars fight back against “declining volumes, slowing growth and a weakening global consumer”. While there are other potential acquirers, including Mondelez International, a purchase by Mars would face less regulatory scrutiny as Mars has less overlap with Kellanova than other brands.
The financial logic of the deal “can just about work, too”, says Jennifer Saba on Breakingviews. There could be nearly $1 billion of synergies. However, the timing “may seem odd”, as Procter & Gamble, McDonald’s and even Amazon have noted that shoppers “are becoming much more discerning on price”.
Meanwhile anti-obesity drugs from Novo Nordisk, Eli Lilly and others “threaten consumption of empty-calorie treats”. Still, “if the market is getting tougher, bulking up to take a bigger piece of it is a textbook defence”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
What makes you wealthy in the UK? Could it make you a target in Rachel Reeves’ Budget?Wealthy Brits could be at risk from a Budget tax raid – but how much money do you need to be considered wealthy in the UK?
-
More retirees are buying inflation-protected annuities. What are they and how do they work?Sales of annuities where the income on offer increases every year have surged – and more people are also taking up enhanced rates that are higher due to illness
-
Pierre-Édouard Stérin wants to make France great againConservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growthPinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
8 of the best houses for sale with folliesThe best houses for sale with follies in the grounds – from a five-storey Victorian Gothic tower in Tonbridge, Kent, to a former mill in Oxfordshire with gardens that include a folly on an island in a lake
-
A tale of two Reits – why performance matters for valuationAEW UK and Regional are two Reits that are valued very differently, despite a shared focus on properties outside London
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
