Kellanova shares surge by 16%

(Image credit: SOPA Images / Contributor)

published 13 August 2024

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”.

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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”.

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Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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