Pringles' $36 bln deal comes with a pinch of salt
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jennifer Saba
NEW YORK, Aug 14 (Reuters Breakingviews) -Mars is adding Pringles next to the M&M’s in its corporate pantry. A $36 billion deal for potato-chip maker Kellanova K.N makes sense to round out its chocolate-heavy portfolio. Still, take the idea that this will be a quick and easy bite with a pinch of salt: jumbo financing and hostile regulators might complicate the snack party.
Mars said Wednesday that it would acquire the Cheez-It and Eggo producer in an all-cash transaction that counts as the year’s largest, according to Dealogic. To take down this prize, Mars is using a chunky slice of debt. The company inked a $29 billion “bridge loan” - a temporary IOU to be replaced by a long-term arrangement later - from JPMorgan and Citi. It dwarfs plenty of the biggest bridge loans offered in 2023, a marked break from the doldrums that have afflicted bank-led M&A financing. Finding a permanent replacement will be a test of the market’s recovery.
Mars’s gigantism helps. The company’s net sales topped $50 billion last year; adding that onto Kellanova’s gets to around $65 billion. If the two hit an EBITDA margin of 20%, similar to other snack giants, that would produce $13 billion of such profit, handily supporting the leverage.
The deal’s size and an uncertain economy - especially as firms like McDonald’s MCD.N bemoan a stretched consumer - could nudge up financing costs. But Mars has found nifty solutions before. For its $23 billion purchase of gum-maker Wrigley, in the teeth of the 2008 crisis, Warren Buffet stepped in to buy bonds and preferred stock. These days, Mars works with a huge network of bank and non-bank lenders. That it’s a family-controlled, predictable business may give them confidence to take chunks of the bulging loan.
There will probably be plenty of time to sort it out. Though expected to close in 2025’s first half, the merger agreement automatically extends out to two years’ time if antitrust enforcers drag their feet in signing off. There seem few obvious competition concerns – Mars and Kellanova together represent 12% of the U.S. snacking and candy market, Reuters reported – but big reviews are lengthy and regulators are pushing the boundaries. Just look at handbag retailers Tapestry TPR.N and Capri CPRI.N, tangled up in a Federal Trade Commission suit to block their $8.5 billion tie-up under unusually novel theories of harm.
Still, Kellanova’s shares spiked over $80 on Wednesday morning, indicating high confidence of success. That may well be right - it’ll just take a lot to get there.
Follow @jennifersaba on X
CONTEXT NEWS
Privately held Mars said on Aug. 14 that it had agreed to buy rival snack-maker Kellanova for $83.50 per share, or $35.9 billion including net debt. The valuation represents a 33% premium to Kellanova’s undisturbed price on Aug. 2, prior to press reports on a potential deal.
Kellanova is the maker of Pringles and Cheez-It. It separated from North American cereal seller WK Kellogg in 2023. Mars is the owner of M&M’s, Snickers and pet food Pedigree. The buyer reported net sales of more than $50 billion in 2023.
Mars is taking out a bridge loan of $29 billion to fund the acquisition, in addition to using cash on hand, according to regulatory filings.
Mars-Kellanova stacks up as the biggest deal in 2024 https://reut.rs/3X574Pu
Editing by Jonathan Guilford, Sharon Lam and Pranav Kiran
Aset Berkaitan
Berita Terkini
Penafian: Entiti XM Group menyediakan perkhidmatan pelaksanaan sahaja dan akses ke Kemudahan Dagangan Atas Talian, yang membolehkan sesorang melihat dan/atau menggunakan kandungan yang ada di dalam atau melalui laman web, tidak bertujuan untuk mengubah atau memperluas, juga tidak mengubah atau mengembangkannya. Akses dan penggunaan tersebut tertakluk kepada: (i) Terma dan Syarat; (ii) Amaran Risiko; dan Penafian Penuh. Oleh itu, kandungan sedemikian disediakan tidak lebih dari sekadar maklumat umum. Terutamanya, perlu diketahui bahawa kandungan Kemudahan Dagangan Atas Talian bukan permintaan, atau tawaran untuk melakukan transaksi dalam pasaran kewangan. Berdagang dalam mana-mana pasaran kewangan melibatkan tahap risiko yang besar terhadap modal anda.
Semua bahan yang diterbitkan di Kemudahan Dagangan Atas Talian kami bertujuan hanya untuk tujuan pendidikan/maklumat dan tidak mengandungi – dan tidak boleh dianggap mengandungi nasihat kewangan, cukai pelaburan atau dagangan dan cadangan, atau rekod harga dagangan kami, atau tawaran, atau permintaan untuk suatu transaksi dalam sebarang instrumen kewangan atau promosi kewangan yang tidak diminta kepada anda.
Sebarang kandungan pihak ketiga serta kandungan yang disediakan oleh XM, seperti pendapat, berita, penyelidikan, analisis, harga, maklumat lain atau pautan ke laman web pihak ketiga yang terdapat dalam laman web ini disediakan berdasarkan "seadanya" sebagai ulasan pasaran umum dan bukanlah nasihat pelaburan. Sesuai dengan apa-apa kandungan yang ditafsir sebagai penyelidikan pelaburan, anda mestilah ambil perhatian dan menerima bahawa kandungan tersebut tidak bertujuan dan tidak sediakan berdasarkan keperluan undang-undang yang direka untuk mempromosikan penyelidikan pelaburan bebas dan oleh itu, ia dianggap sebagai komunikasi pemasaran di bawah peraturan dan undang-undang yang berkaitan. SIla pastikan bahawa anda telah membaca dan memahami Notifikasi mengenai Penyelidikan Pelaburan Bukan Bebas dan Amaran Risiko mengenai maklumat di atas yang boleh diakses di sini.
