Mars' $36B Kellanova Deal: Analysts See Minimal Category Overlap, No Competing Bids

In a standout M&A move, Mars, Inc. has agreed to acquire Kellanova K for $83.50 per share, marking a 44% premium over its 30-day average price. The $35.9 billion transaction is anticipated to be finalized in the first half of 2025, subject to shareholder and regulatory approvals.

Here’s what analysts are saying about the deal:

• RBC Capital Markets analyst Nik Modi downgraded Kellanova from Outperform to Sector Perform, raising the price forecast to $83.50 from $76.
• Piper Sandler analyst Michael S. Lavery reiterated the Neutral rating on the stock, raising the price forecast to $83 from $63.

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RBC Capital: According to Modi, the price forecast has been raised to match the deal price.

The analyst anticipates no competing bids or closure issues for the deal, citing minimal category overlap.

Modi notes that the deal aligns with Mars’ snacking strategy and faces minimal FTC risk due to the distinct portfolios. The analyst projects FY24 EPS of $3.62 and FY25 EPS of $3.92.

Piper Sandler: Lavery anticipates antitrust clearance due to minimal category overlap, with the exception of wholesome snack bars, where regulatory concerns are unlikely.

Mars holds an approximately 11% share in wholesome snack bars, compared to Kellanova’s ~5% share over the past 52 weeks, Lavery highlights.

The analyst maintained 2024 EPS of $3.70 and 2025E EPS of $3.79.

Mars’ wholesome snack bars are priced about 135% higher than Kellanova’s.

The fragmented snacking category and lack of entry barriers suggest minimal risk of increased brand pricing post-acquisition, the analyst adds.

Price Action: K shares are trading higher by 0.07% to $80.34 at last check Thursday.

Image by Hans from Pixabay

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