Kellanova: Short Independent History to Wrap in H1 2025 as Mars Looks to Speed Its Growth

Key Morningstar Metrics for Kellanova

• Fair Value Estimate: $75.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

Heady top-line growth has characterized the mature North American packaged food space of late, on the heels of robust pandemic demand followed by inflation-induced price increases. But some don’t want the party to end. To further enhance its exposure to the snacking aisle, privately held Mars announced its intention to acquire Kellanova K in a nearly $36 billion deal (including debt) slated to close in the first half of 2025. The acquisition price—$83.50 per share, or 16.4 times trailing 12-month adjusted EBITDA—strikes us as attractive, given it’s a more than 10% premium to our fair value estimate of $75 per share. As we expect the deal to close, we’re raising our intrinsic valuation to align with the takeout price.

We see the transaction’s strategic merits, as it brings together Kellanova’s predominantly salty snacking mix (including Pringles and Cheez-It) with Mars’ sizable confectionery arm (such as M&Ms, Twix, and Snickers), affording a runway for growth. The combined firm would be one of the leading operators in packaged food, with $60 billion-$70 billion in annual sales and a portfolio of 17 billion-dollar brands.

Despite the opportunity to buoy sales, we note that this deal runs in stark contrast to efforts across the industry over the past several years to slim down to unlock the benefits of focus. As such, we wouldn’t be surprised if Mars ultimately opted to shed some ancillary brands in time, such as MorningStar Farms.

While we don’t think this deal will be held up by antitrust concerns, other potential buyers could face more daunting challenges. Thus, we don’t expect a bidding war to emerge. This also underpins our contention that this tie-up is unlikely to jump-start a rash of consolidation in the industry. However, with relatively healthy balance sheets throughout the industry, we anticipate leading players will look to continue tactically acquiring smaller niche operators.