Froot Loops maker WK Kellogg agrees to $3.1 billion deal from Italy's Ferrero
Deal making in the snacking space has picked up pace as food brands battle with muted sales in the wake of price hikes owing to higher input costs and a shift in consumer preference for healthier options.
Kellanova, which was created at the same time as WK Kellogg when Kellogg Company split into two, is also in the process of being acquired by candy giant Mars in a nearly $36 billion deal.
Shares of WK Kellogg jumped 30.6% at $22.85 in mid-day trading on Thursday, nearly matching the premium that Ferrero's $23 per share deal represented.
The acquisition, Ferrero's biggest since 2018, will bring legacy brands such as Nutella, Kinder, Tic Tac, Frosted Flakes, Froot Loops and Special K under one roof when the transaction closes, expectedly in the second half of 2025.
"WK Kellogg's (acquisition) gives it diversification from its cocoa heavy portfolio and instant U.S. distribution, shelf space, and a brand portfolio ... in a lucrative market that it can drizzle with innovation at a relatively good price," Michael Ashley Schulman, chief investment officer of Running Point Capital Advisors said.
Strong demand and strained supply had pushed cocoa prices to a record high last year, sparking concerns among companies that use the chocolate-making ingredient for packaged food items.
Several U.S. packaged food companies, including J.M. Smucker (SJM.N), opens new tab, Kraft Heinz (KHC.O), opens new tab and PepsiCo (PEP.O), opens new tab, have also been hit by uncertainties sparked by President Donald Trump's erratic trade policy.
More recently, they even came under pressure from Health Secretary Robert F. Kennedy Jr.'s Make America Healthy Again Commission to eliminate the use of synthetic dyes.
Ferrero, the maker of Nutella hazelnut spread, has turned into a global group, boosted by the aggressive acquisition campaign launched by its executive chairman, Giovanni Ferrero.
In 2018, Ferrero bought Nestle's (NESN.S), opens new tab U.S. confectionery business for $2.8 billion.
The group reported a turnover of 18.4 billion euros ($19.2 billion) in the financial year ending on August 31 and said it had increased its investments to boost manufacturing capabilities and expand across categories.
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